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US home prices fell in January for the 7-straight month

March 29, 2023

U.S. home prices fell for the seventh month in a row in January, as the Case-Shiller US National Home Price Index is now 3% off its 2022 peak.

“2023 began as 2022 had ended, with US home prices falling for the seventh consecutive month,” said Craig Lazzara, managing director at S&P Dow Jones Indices.

On a seasonally adjusted basis, U.S. prices fell 0.2% for month and are now only up 3.8% for the year. The 20-city index is 4.7% off last spring’s high after falling 0.4% for month and rising just 2.6% over the past 12 months.

The three California market in the 20-city index have some of the largest drops off last year’s all-time highs, using seasonally adjusted data …

No. 1 San Francisco: 13.2% off last spring’s high. Down 0.8% for month, down 7.6% for the year.

No. 4 San Diego: 8.3% off high. Down 0.6% for month, down 1.4% for the year.

No. 6 Los Angeles-Orange County: 6.4% off high. Down 0.3% for month, up 0.9% for the year.

“January’s home price weakness is yet more proof of the doldrums the housing market was stuck in during the fall and winter, when buyers and sellers were forced to come to terms with a new, relatively higher-interest-rate environment,” said Jeff Tucker, senior economist at Zillow.

Fed focus

Home prices have been falling as a result of the Federal Reserve’s historic effort to rein in inflation. That battle has caused mortgage rates to spike over the past year, resulting in many home buyers being priced out of purchasing a home.

Typically, when demand drops, supply swells and prices go down. But fewer homes are coming to market for sale because ultra-low interest rates over the past few years are causing many home owners to stay put, keeping the inventory of homes stubbornly low.

This was all before banks began failing in March, the impact of which is obviously not reflected in January’s data.

“Financial news this month has been dominated by ructions in the commercial banking industry, as some institutions’ risk management functions proved unequal to the rising level of interest rates,” said Lazzara. “Despite this, the Federal Reserve remains focused on its inflation-reduction targets, which suggest that rates may remain elevated in the near term.”

As a result, said Lazzara, mortgage financing and the prospect of economic weakness are likely to remain a headwind for housing prices for at least the next several months.

Mortgage rates are expected to be volatile for as long as the Fed has to work to pull back runaway inflation. Rates had been rising in February as inflation did not seem to be cooling as much or as quickly as expected. But when banks collapsed in March the uncertainty in the financial sector caused investors to take actions that resulted in mortgage rates ticking down in recent weeks.

“As the market comes back to life this spring, prices are likely to rise month over month, but fall year over year, compared to last year’s frenzied spring shopping season when buyers raced to lock in lower mortgage rates,” said Tucker. “Just how much prices will rise from winter lows will depend on whether mortgage rates stabilize and creep downward or stay high and volatile.”

Elsewhere

How the other 17 markets in the 20-city fared through January, ranked by their drop off their 2022 peak using seasonally adjusted data …

Seattle: 11.4% off last spring’s high. Down 1.5% for month, down 5.1% for the year.

Phoenix: 8.3% off high. Down 0.8% for month, up 0.0% for the year.

Las Vegas: 8% off high. Down 1.1% for month, up 0.4% for the year.

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Denver: 6.4% off high. Down 1.0% for month, up 1% for the year.

Portland: 6.1% off high. Down 0.6% for month, down 0.5% for the year.

Dallas: 5.7% off high. Down 0.6% for month, up 5% for the year.

Tampa: 3.5% off high. Down 0.3% for month, up 10.5% for the year.

Boston: 2.9% off high. Up 0.3% for month, up 4.2% for the year.

Washington: 2.7% off high. Down 0.3% for month, up 2.4% for the year.

Charlotte: 2.4% off high. Up 0.2% for month, up 8.1% for the year.

New York: 2.3% off high. Down 0.2% for month, up 5.2% for the year.

Minneapolis: 2.1% off high. Down 0.2% for month, up 1.8% for the year.

Detroit: 2.0% off high. Down 0.1% for month, up 3.2% for the year.

Atlanta: 1.7% off high. Flat for month, up 8.4% for the year.

Miami: 1.5% off high. Up 0.1% for month, up 13.8% for the year.

Chicago: 1% off high. Flat for month, up 4.8% for the year.

Cleveland: 1% off high. Up 0.1% for month, up 4.8% for the year.

Orange County Register

News Details

US home prices fell in January for the 7-straight month

Fed focus

Elsewhere

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