Apartment prices in the US are still significantly higher than they were a year ago, but it seems that the pace has already changed. The reason is of course the rapid increase in interest rates by the Fed, which forces the public to tighten their belts and possibly give up new mortgages. This is the sharpest decline in the American housing market in years many
The index, which tracks the largest housing markets in the United States, rose 12.1% in August in a year-on-year comparison, compared to a 14.9% increase in July. Prices in the wider metropolitan areas increased in the 12 months ending in August by 13.1%, compared to a 15.6% increase in the July figure, a decrease of 2.6 percentage points. This is the fastest rate in the history of the index, which was launched in 1987 – meaning that price increases are slowing down at a record pace.
Prices fell by 1.6% in August, well above expectations for a 0.7% drop. Seasonally adjusted, this is a decrease of 1.3%, also well above the expected decrease of 0.5%. In the previous month, prices decreased by 0.8% and 0.7% respectively.
The company that manages the index called the impressively named S&P CoreLogic Case-Shiller Home Price Index, said that “price increases have slowed in each of the cities we follow. These data clearly show that the growth rate of apartment prices peaked in the spring of 2022 and has been declining ever since.”
The West Coast, which includes some of the most expensive housing markets in the US, led the declines, with San Francisco (-4.3%), Seattle (-3.9%) and San Diego (-2.8%) falling the most.
The cities that led the price increases in August were Miami, Tampa and Charlotte, with annual increases of 28.6%, 28% and 21.3%, respectively. The other cities reported lower price increases in the period ending in August compared to the period ending in July.
As mentioned, the reason is the increase in interest rates. In the US, this leads to a strong fall in taking out mortgages and reversed the price trend in the hot housing market. The average interest rate on the 30-year fixed apartment loan at the beginning of the year was about 3%, in June it reached over 6% and now it has crossed the -7%. This means that the monthly mortgage payments, which are 75% higher than last year, cause many first-time buyers to stay out of the housing market, while at the same time inflation is eroding the value of money at a rapid rate of 8.2%.
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