By Meghan McCarty Carino
From the Federal Reserve’s perspective, they’re starting to win the fight against inflation if home prices are going down.
NEW YORK – The housing market has slowed way down, as expected, in response to rising interest rates. Home prices fell for the third straight month in September, according to the S&P CoreLogic Case-Shiller index. Its measure of national home prices dropped by 1% from the previous month, though values were still about 10% higher than a year earlier.
In case there was any lingering doubt, the new data shows the housing market has definitely turned, according to Mark Zandi, chief economist at Moody’s Analytics.
“It feels somewhat clifflike at the moment,” he said. “You know, I think what this reflects is whiplash. I mean, what goes up comes down.”
And down is the direction the Federal Reserve wants to see prices go as it tries to curb inflation, per Craig Lazzara, managing director at S&P Dow Jones Indices – which produces the Case-Shiller index.
“This is a feature, not a bug. This is what they want to see,” Lazzara said. “If I were [Fed Chair] Jay Powell, I would like it.”
Rising interest rates hit the housing market fast. According to Odeta Kushi, deputy chief economist at First American, the September index doesn’t even show the full extent.
“It’s mostly reflecting signed contracts in May through August, which is when the 30-year fixed-rate mortgage was in the low- to mid-5% range.”
Since then, 30-year fixed rates have topped 7% at times, which means prices likely have further to fall – especially in the most expensive markets. While prices dropped in all 20 cities tracked by the Case Shiller index, San Francisco, Seattle and other West Coast cities had some of the steepest declines, said Stuart Gabriel of the University of California, Los Angeles.
“We have very significant problems of affordability that relate to both high mortgage interest rates and high house prices,” he said. “That, of course, is prompting moves by households to more affordable areas.”
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