A New Kind of Record

Mortgage rate hikes are making it increasingly difficult for buyers, particularly first-time homebuyers, to enter the real estate market. Consequently, the real estate market is feeling those effects. How so? Falling home prices. In fact, according to Realtor.com, “Home prices posted their first year-over-year price decline in 11 years in April, as higher mortgage rates made home purchases more expensive for buyers.”

How is this measured? 

Well, the S&P CoreLogic Case-Shiller National Home Price Index (say that ten times fast) is used to measure growth nationally, over a course of time whether that is weekly, monthly, annually, and year-over-year. The index fell 0.2% in April, compared with a 0.7% annual growth rate the prior month. The annual decline was the first for the index since April 2012: ELEVEN years.

The impetus for this decline comes directly from the steep and rapid increase in mortgage rates seen in 2022. This caused buyers to leave the market as house-buying affordability fell to essentially an all-time low. In having higher interest rates, the hope was that home prices would fall. It didn’t have quite the intended effect. 

Instead, home prices kind of just stalled because the higher interest rates made people reluctant to sell. This basically put a kibosh on market inventory. 

Is there an end in sight? 

Well, things like that are hard to predict. Experts are hopeful that rates will fall back below 6% by the end of the year. Currently, the average rate for a 30-year fixed mortgage was 6.67% in the week ended June 22, up from 5.81% a year earlier, according to Freddie Mac.