"The resulting affordability pressures are evident in the home price declines of the past two quarters"
Single-family home prices in the United States increased at a non-seasonally adjusted annual rate of 9.2% in Q4 2022, according to the latest Home Price Index (FNM-HPI) reading from Fannie Mae. This marks a decrease from the previous quarter’s annual growth rate of 13.1%.
On a quarterly basis, home prices rose a seasonally adjusted 0.2%, just above the 0.1% growth seen in the previous quarter. However, on a non-seasonally adjusted basis, home prices declined by 1.0% in Q4 2022.
Mark Palim, Fannie Mae vice president and deputy chief economist, attributes the recent decline in home prices to the rise in mortgage rates over the past year and record inflation, which has constrained the purchasing power of prospective homebuyers.
“The resulting affordability pressures are evident in the home price declines of the past two quarters, along with the downturn in home sales,” Palim said. “The rise in rates also exacerbates the ‘lock-in effect’ in which existing homeowners who have rates well below current market rates have a financial disincentive to give up their current mortgage and purchase a different home at a higher mortgage rate, thereby reducing the supply of homes available for sale.”
Palim believes the tension between lower mortgage demand and low supply and how it is resolved will hugely impact home prices in 2023.
The FNM-HPI measures the average quarterly price change for all single-family properties in the US, excluding condos. Fannie Mae aggregates county-level data to create both seasonally adjusted and non-seasonally adjusted national indices to gauge general single-family home price trends.