But strong mortgage demand continues to push prices up.
Single-family home prices cooled in the first quarter, but pent-up mortgage demand continued to drive price growth.
Annual price growth of single-family properties rose at a pace of 4.7% in Q1 2023, down from the revised annual growth rate of 8.6% in Q4 2022, according to Fannie Mae’s latest Home Price Index (HPI). Quarter over quarter, home prices ticked up 1% in the first quarter after seeing a 0.0% change in the previous quarter.
“As expected, the annual rate of increase in home prices has slowed dramatically in response to the rapid and significant increase in interest rates,” said Doug Duncan, senior vice president and chief economist of Fannie Mae.
“Still, the fact that prices rose slightly in the first quarter is evidence of significant pent-up mortgage demand, despite ongoing affordability constraints.
“Even though mortgage rates remain elevated compared to the previous few years, the acute lack of housing supply remains supportive of home prices. Of course, the shortage of homes for sale is currently being exacerbated by the so-called ‘lock-in effect,’ which continues to disincentivize huge numbers of households with low mortgage rates from listing their homes.”
Fannie Mae’s HPI consists of seasonally adjusted and non-seasonally adjusted national indices designed to serve as indicators of general single-family home price trends. The index, first produced in 1975, is publicly available at the national level and is published mid-month during the first month of each new quarter.