U.S. home prices continue decade-long streak of gains, but the pace is slowing

Aug. 29 (UPI) -- Low inventory in part helped drive the average price of a single-family home up 3% compared to last year, the Federal Housing Finance Agency said Tuesday.

The agency's House Price Index showed home prices during the three-month period ending in June rose 3% compared to the same period in 2022. Quarter-on-quarter, and prices increased by 1.7%, data show.

"U.S. house prices appreciated at a slightly higher rate in the second quarter amid low inventory," Anju Vajja, the associate director for research and statistics at the FHFA.

Levels are far less than the 18.7% increase reported year-on-year to the first quarter of 2022, showing inflationary strains are easing. But home prices have not shown a real contraction to negative growth since early 2011.

The National Association of Realtors put the average median price of an existing home at $406,700. NAR data show monthly payments as a portion of average income reached 28.5% in June, the last full month for which data are available, compared with 14.7% for the full-year average in 2020.

That comes as lending rates top 7.3% for a 30-year, fixed-term mortgage, the highest level in well over a decade. The Mortgage Bankers Association last week said mortgage applications cratered by 4.2% over the seven-day period ending Aug. 18.

While the shelter component on consumer-level inflation is suppressed, aggressive rate hikes from the U.S. Federal Reserve are making borrowing more prohibitive.

"Beyond changes in interest rates, bank lending standards have tightened, and loan growth has slowed sharply," Federal Reserve Chairman Jerome Powell said at last week's economic summit in Jackson Hole, Wyo.

Lawrence Yun, the NAR's chief economist, said a policy reversal may be necessary for a rebound in the housing market.

"Retreating mortgage rates will bring more buyers and sellers to the market and get Americans moving again," he said.