The US housing market is slowing down, with the Federal Housing Finance Agency (FHFA) reporting only a 0.1% rise in house prices in March 2024, down from a 1.2% increase in February. Rising mortgage rates, now around 7%, are making homeownership less affordable. Despite the slowdown, prices are still up 6.7% year-over-year, compared to 7.1% in February. The ongoing shortage of available homes continues to support high prices, but existing home sales have dipped. The market is entering a period of adjustment as rising rates and low inventory create a complex landscape.
The US housing market, which has seen growth in recent years, is showing signs of a slowdown. Data released by the Federal Housing Finance Agency (FHFA) indicates a significant decrease in the rate of price increases.
March 2024 saw a mere 0.1% rise in house prices, a stark contrast to the unrevised 1.2% increase witnessed in February. This sharp deceleration is likely linked to rising mortgage rates, which are currently hovering around 7%, making homeownership less affordable for many potential buyers.
Despite the slowdown, house prices remain higher than last year. March saw a 6.7% year-over-year increase, compared to 7.1% in February. However, this growth represents a notable dip from the rapid price hikes experienced in the past few years.
While rising mortgage rates may cool demand, a key factor supporting continued high prices is the ongoing shortage of available homes. Existing home sales, which make up the majority of US home sales (approximately 90%), have dipped due to rising mortgage rates. However, the limited housing inventory, which remains below pre-pandemic levels, prevents a sharp decline in prices. Prices increased 6.6% between the first quarter of this year and the first three months of 2023. They were up 1.1% compared to the fourth quarter.
The US housing market is likely entering a period of adjustment. While prices are still rising year-over-year, the rate of increase has slowed significantly (from 1.2% in February to 0.1% in March). Rising mortgage rates coupled with low inventory paint a complex picture for the market. It remains to be seen if the inventory shortage can continue to prop up prices as mortgage rates climb further.
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