Home Price Declines Moderated in September, Thanks To Temporary Mortgage Rate Relief (September 2022 Market Report)
- The typical U.S. home value was unchanged in September from August
- Listings now take 19 days to go pending, up from 11 this time last year
- Active inventory has climbed 3% above year-ago levels, but is still far below pre-pandemic norms
- Rising rates throughout September have pushed unaffordability to new heights
Home values flatlined in September, ending a 2-month slide in which they fell 0.4% from a peak of $359,719 in June. The reprieve in home price declines may be thanks to a late-summer drop in mortgage rates, to an average of 5.22% in August on a 30-year fixed loan, which gave some buyers a reason to jump off the fence and buy then. Due to the elapsed time of multiple weeks between home purchase offers being made and the transactions closing, August’s more favorable lending conditions likely affected closed sale prices in September. Unfortunately for buyers, rates have risen dramatically since August, and reached a new 20-year high of 6.92% in mid-October, promising a further market cooldown ahead.
While national prices held steady, the tumble continued in many formerly-hot housing markets. The largest monthly declines were in Phoenix (-2.3%), Las Vegas (-1.9%), New Orleans (-1.0%), Riverside (-0.9%), and Austin (-0.9%). Meanwhile, prices continued to rise in the Southeast and Midwest, led by the Richmond (0.6%), Miami (0.6%), and Indianapolis (0.6%) markets. Taking a longer view, the run-up in Florida’s home values is remarkable: All four of the major markets with the greatest year-over-year home value appreciation are in Florida: Miami (25.7%), Orlando (23.4%), Tampa (23.2%) and Jacksonville (22.6%).
Active inventory has climbed 3% above year-ago levels, but is still far below pre-pandemic norms
The count of active inventory in September was 3% higher than last year’s, meaning more options for buyers and more competitive pressure on sellers. That’s happening in spite of further declines in the flow of new listings (down 16.2% from last year, much like August’s 16.5% year-over-year decline).
How could inventory keep rising above year-ago levels if new listings keep falling short? Fewer sales. The number of newly pending listings in September dropped a whopping 29% compared to last September. Pending sales are likely the first casualty of the renewed surge in mortgage rates in September, which averaged 6.11%, or 89 basis points more than their August average.
For the sellers who did successfully accept an offer in September, it took them longer than in any month since January 2021: 19 days, up from 11 at this time last year. Those longer listing spells are also inspiring more sellers to try to attract an offer with a price cut, which could be found on 27.5% of listings in September – a new high in our detailed listings data going back to 2018. The pre-pandemic high was 22.4% of listings with price cuts, in October 2018.
Rent growth eases
Typical U.S. asking rents rose only 0.3% in September – the lowest monthly growth rate since January 2021 – and are now $2,084 per month. Annual rent growth has eased steadily from a record-high 17.2% in February to 10.8% in September. The deceleration in asking rent growth is being watched closely as an early signal of decelerating average rent paid, which looms large in the CPI and PCE inflation indexes tracked by the Federal Open Market Committee when setting monetary policy. Prior research has found a 12-month lag between ZORI and CPI rent growth rates, raising the possibility that CPI rent growth could reach a peak in February 2023. Annual growth in the CPI’s Rent of Primary Residence component accelerated again in September, to a 40-year high of 7.2%. Another rent measure which looms even larger is the CPI’s Owners Equivalent Rent of Residences component, which reached a series high annual growth rate of 6.68%, the highest on record since its inception almost 40 years ago.
Annual rent growth was the strongest in Miami (18.3%), New York (15.5%), and San Diego (15.0%), but all three saw major deceleration from August’s annual rent growth. Miami, for instance, has decelerated from a peak rent growth rate of 33.0% in February. The slowest year over year growth in September was in Baltimore (4.2%), Minneapolis (4.3%), and Las Vegas (4.5%).