Growing share of listings may have to cut prices to meet reduced demand, expert says.
Single-family home price growth slowed to an annualized pace of 13.8% in the third quarter, according to Fannie Mae’s latest Home Price Index (HPI).
The Q3 home price reading is down from 19.1% in Q2, according to the index, which measures the average quarterly price change for all single-family properties in the United States (excluding condos).
On a quarterly basis, home prices climbed at a seasonally adjusted 0.2% in the third quarter, the slowest quarter of growth since the fourth quarter of 2011. On a non-seasonally adjusted basis, home prices were down by 0.2% in the third quarter.
“Year-over-year home price growth decelerated in the third quarter, as the sharp rise in mortgage rates – and declining housing affordability – appears to have weighed further on demand,” said Fannie Mae chief economist Doug Duncan.
According to the Mortgage Bankers Association, mortgage application volume fell 2% for the week ending Oct. 7. Applications for both refinancing and home purchases also continued to fall behind last year’s record levels, down 86% and 39%, respectively.
“In addition to the greater affordability constraints for potential homebuyers, many existing homeowners likely feel ‘locked-in’ to their existing, lower-interest-rate mortgages,” Duncan explained. “This contributes to fewer homes being listed, as well as fewer potential buyers, and may lead to a growing share of listings having to cut prices to meet the reduced demand.”
Duncan added that the supply of completed, new single-family homes for sale has started to increase, suggesting that homebuilders may also need to begin offering greater price concessions to move inventory. “We expect these trends to continue in the coming months,” he said.