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Home prices rise but at a slower pace

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Daniel Acker | Bloomberg | Getty Images

Home prices are still considerably higher than they were a year ago, when the pandemic caused a massive run on housing, but the gains are finally starting to ease up.

Home prices rose 19.5% in September year over year, down from a 19.8% annual gain in August, according to the S&P CoreLogic Case-Shiller national home price index. That is the first decrease in the annual gain since May 2020.

The 10-city composite rose 17.8% from a year ago, down from an 18.6% gain in August. The 20-city composite gained 19.1% year-over-year, down from 19.6% in the previous month.

Cities with the highest price increases were Phoenix, Tampa, and Miami. Phoenix prices were up 33.1% year-over-year, Tampa up 27.7% and Miami up 25.2%. Six of the 20 cities reported higher price increases in the year ending September 2021 versus the year ending August 2021.

Chicago, Minneapolis and Washington D.C. saw the smallest annual price gains, but the gains were all still over 10%.

“If I had to choose only one word to describe September 2021′s housing price data, the word would be ‘deceleration,’ says Craig Lazzara, managing director at S&P Dow Jones Indices. “Housing prices continued to show remarkable strength in September, though the pace of price increases declined slightly.”

Extremely tight inventory, as well as heavy investor activity in the housing market, is keeping prices elevated. While the gains are falling, it is unlikely that prices will drop dramatically as they did during the housing crash. The fundamentals of supply and demand still favor an expensive market.

“The market has cooled since the beginning of the year, when dozens of competing bids, contingency waivers and price escalation clauses made home shopping a struggle, especially for first-time buyers. A growing number of homeowners are preparing to list in the next six months, hinting at an uncharacteristically active winter season,” said George Ratiu, manager of economic research at Realtor.com.

Rising mortgage rates are also playing into prices. The average rate on the 30-year fixed fell to a recent low of 2.78% at the start of August, according to Mortgage News Daily, and then began rising steadily. It ended September at 3.15%.

Real Estate and the Bottom Line

  • Home prices rose 19.5% in September year over year, down from a 19.8% annual gain in August, according to the S&P CoreLogic Case-Shiller national home price index.

  • The 10-city composite rose 17.8% from a year ago, down from an 18.6% gain in August. The 20-city composite gained 19.1% year-over-year, down from 19.6% in the previous month.

  • Cities with the highest price increases were Phoenix, Tampa, and Miam

Boston Condos for Sale and Apartment Rentals

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Boston Condos for sale Sale and Rent

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Home prices rise, but at a slower pace

The median sales price of a home in all but one of the 183 metro areas monitored by the National Association of Realtors rose in the third quarter, while 78% of the markets experienced double-digit increases, a decline from the second quarter, when 94% of markets saw double-digit increases.

Three markets saw annual increases of more than 30%, down from 12% in the second quarter, the NAR said in a press release.

Home prices are continuing to move upward, but the rate at which they ascended slowed in the third quarter,” NAR chief economist Lawrence Yun said. “I expect more homes to hit the market as early as next year, and that additional inventory, combined with higher mortgage rates, should markedly reduce the speed of price increases.”

Overall, the national median sales price of a single-family existing home rose 16% year over year in the third quarter to $363,700, down from a 22.9% increase in the second quarter. By region, the Northeast led the way by price growth with a 17.5% rise, followed by the South, with a 14.9% gain, the Midwest, with a 10.7% increase, and the West, which saw prices climb 10.3%.

“While buyer bidding wars lessened in the third quarter compared to early 2021, consumers still faced stiff competition for homes located in the top ten markets,” Yun said. “Most properties were only on the market for a few days before being listed as under contract.”

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