Home price growth has slowed to a near standstill
U.S. home prices rose just over 0.2% in June, according to the latest data from the Redfin Home Price Index (RHPI).
This is the smallest increase in home price indexes on a seasonally adjusted basis since January 2023, although homes were selling for much lower around this time in 2022.
The Redfin Home Price Index uses the repeat-sales pricing metric to track seasonal changes in the prices of single-family homes, including those bought with mortgages and cash.
The RHPI tracks the sale prices of homes during a given period and also considers what those houses sold for the last time they changed owners, similar to the S&P CoreLogic Case-Shiller Home Price Index.
Notably, Redfin's RHPI is released one month before the Case-Shiller data.
“Prospective sellers can use the RHPI to help determine whether it’s a good time to list a home in their area,” said Redfin Chief Economist Daryl Fairweather.
“And prospective buyers can monitor the index to understand how the market is reacting to mortgage rates and supply constraints.”
The Fed is still insisting on higher rates
One reason home price growth is slowing is elevated mortgage rates.
The Federal Reserve has kept the rates steady at 5.33% since August 2023, marking the highest level seen since 2001, when the economy tipped into a mild recession.
The Fed aims to control persistent post-pandemic inflation by maintaining this high rate, hoping to stabilize prices before guiding the economy towards a soft landing.
As a result, mortgage interest rates have remained high, and demand for new loans has been only modest.
According to Freddie Mac's Primary Mortgage Market Survey, the average rate for a 30-year fixed-rate mortgage was 6.77% for the week ending July 18.
Mortgage originations in the first quarter of 2024 have dropped below levels seen during previous periods of slow home price growth.
The Mortgage Bankers Association reported $377 billion in mortgage originations at the start of 2024, compared to $398 billion at the beginning of 2023.
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