Despite a significant improvement in housing supply, detached home prices in the United States continued to rise in August, indicating that affordability remains a challenge for many prospective homebuyers.
The Federal Housing Finance Agency in the United States reported on Tuesday, October 28th that national home prices rose by 0.4% month-to-month in August. Data from July was revised upwards to show that prices remained unchanged last month compared to the initial report of a 0.1% decrease. On an annual basis, prices rose by 2.3% in the 12 months ending in August, holding steady compared to July’s year-over-year increase.
As mortgage rates surged earlier in the year, leading to a weakening of housing demand, housing supply increased. Data released by the National Association of Realtors last week showed that in September, existing home inventory rose by 14.0% from the same period the previous year, reaching 1.55 million units. The government shutdown delayed the release of new housing inventory data for September.
While new housing supply decreased in August, it still remained close to levels seen at the end of 2007. Despite the decline in mortgage rates, rising home prices may deter some potential buyers. A sluggish labor market is also a constraining factor.
Data from mortgage financing entity Freddie Mac shows that the average rate for popular 30-year fixed-rate mortgages, which surged to 7.04% in January, is currently at a low of 6.19% for the year. However, this has not sparked strong demand for home purchase loans among potential buyers.
Economists believe that the current state of the labor market, marked by stagnation in hiring, is affecting potential homebuyers.
The monthly rise in home prices in August was driven by a strong rebound in the Mid-Atlantic region. Prices steadily increased in the South Atlantic, New England, Northeast Central, Southeast Central, and Mountain regions, while prices in the Pacific and Southwest Central regions declined.
Eight Census regions reported that their home prices rose in August, with year-over-year increases ranging from 0.7% in the Southwest Central region to 6.3% in the Mid-Atlantic region. However, prices in the Pacific region declined by 0.6% compared to the same period.
(Reference: Reuters)