Steeper mortgage rates and priced-out buyers paved the way to a slightly cooler housing market in Phoenix and other major cities this spring, hinting that the booming post-pandemic seller’s market may have an expiration date.
Although the market appears to be shifting slightly in favor of buyers, aspiring U.S. homeowners shouldn’t expect to see lower home prices or interest rates anytime soon.
There is a silver lining, however. While home prices aren’t likely to decrease, projections by CoreLogic show annual price appreciation slowing to 5% by May 2023.
This would be a significant change of pace from the current average home price growth rate, which surged nationwide by more than 20% over the last 12 months ending in May, according to the CoreLogic Home Price Index.
Month over month, the increase was 1.8%, fueling the momentum of home price growth over the last decade.
Arizona registered the second-highest year-over-year price growth in the nation, up 27.3%. Phoenix home prices surged 28.7% in May, down from 29.7% month over month.
Florida saw the highest year-over-year home price growth, up 33.2%, followed by Tennessee at 27.4%. The District of Columbia ranked last for appreciation at 4.3%, although CoreLogic forecasts its price growth to rise slightly by May 2023.
Even as surging interest rates suppress the demand for housing, CoreLogic suggests that motivated buyers may have less competition and more opportunities ahead.
“Slowing home price growth reflects the dampening consequence of higher mortgage rates on housing demand, which was the intention,” said Selma Hepp, deputy chief economist at CoreLogic.
With monthly mortgage expenses skyrocketing by roughly 50% in a matter of months, fewer buyers are competing for continually limited inventory, Hepp noted.
“And while annual home price growth still exceeds 20%, we expect to see a rapid deceleration in the rate of growth over the coming year,” she added. “Nevertheless, the normalization of overheated buying conditions should bring about more of a balance between buyers and sellers and a healthier overall housing market.”