U.S. single-family home prices saw a slight increase in July, but the overall momentum appears to be slowing due to improved supply conditions. Coupled with declining mortgage rates, this trend could enhance the affordability of homeownership.
Month-over-month and annual changes
According to the Federal Housing Finance Agency, home prices rose by 0.1 percent month-over-month after remaining stable in June. Over the 12 months leading to July, prices increased by 4.5 percent, marking the smallest annual gain since June 2023, following a revised 5.3 percent rise in June. The previous annual increase was reported at 5.1 percent.
Anju Vajja, deputy director of FHFA’s Division of Research and Statistics, noted that U.S. home prices have exhibited minimal change for three consecutive months. She suggested that the gradual decrease in mortgage rates, combined with relatively stable home prices, could potentially improve housing affordability.
U.S. house prices rose 0.1% in July, according to the FHFA seasonally adjusted monthly House Price Index (HPI®). House prices rose 4.5% from July 2023 to July 2024. The previously reported 0.1% price decrease in June was revised upward to 0.0%. https://t.co/RvvbPm7Vev pic.twitter.com/MQbhZSRGuw
— FHFA (@FHFA) September 24, 2024
Supply and demand dynamics
Mortgage rates have fallen to their lowest levels in over a year and a half and may decline further after the Federal Reserve recently reduced its benchmark overnight interest rate by 50 basis points, bringing it to a range of 4.75 percent to 5.00 percent.
With lower borrowing costs likely to boost demand, which may surpass supply, a significant drop in home prices seems improbable. While the national inventory of previously owned homes is increasing, many regions still face a shortage.
Regional variations in prices
Monthly price gains were notable in the Pacific, Mountain, East North Central, and New England regions, whereas prices decreased in the West South Central, East South Central, and South Atlantic regions.
All nine census regions reported annual price increases, with substantial gains observed in the Middle Atlantic, East North Central, New England, and East South regions. The West South Central region saw a more modest increase of 1.6 percent.
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