Key takeout
The spring home sales season is in full swing, but new data shows that some sellers may be cutting prices as affordability issues continue to plague the market.
Two recent reports show that home prices showed signs of cooling in March. The seasonally adjusted S&P CoreLogic Case Shiller National Home Price Index was 0.3% lower in March compared to February. The Federal Housing Finance Agency (FHFA) reported a similar monthly decline in home prices.
” amidst weak demand caused by rising mortgage rates and economic uncertainty, sellers have begun to close their deals by cutting prices,” said Sal Guatieri, senior economist at BMO Economics.
As mortgages increase, annual home prices will slow down.
According to the FHFA report, home prices have been highly rated at quarterly annual levels since 2012. However, new data may indicate that prices are beginning to make way amidst the affordable challenges caused by high mortgage rates and limited inventory in the housing market.
“We won’t be trending for a month, but we don’t argue that affordability needs to improve,” Guatieri said. “And if borrowing costs don’t decrease, there’s a need for some mix of weakness in price and strong income.”
House prices in the Casesshiller survey were 3.4% higher than a year ago, but the rise in home prices in March slowed down from February. Additionally, Nicholas Godec, head of bond transactions and products at S&P Dow Jones Indices, noted that only 0.9% of home viewings have occurred in the past six months.
“This pattern highlighted a wide range of cooling trends at home prices in the second half of 2024, even if they arrived in spring 2025,” Godec said.
Price slips occur as borrowing costs remain high. At 6.89% on Thursday, Freddie Mac reported mortgage rates are at the highest level since February, well above the 12-month low in September when borrowing costs were just over 6%.
“While home prices may be slowing, housing affordability remains at the worst point in history,” said Robert Frick, corporate economist for the Navy Federal Credit Union. “For residential shoppers, no relief will occur until prices drop along with mortgage rates. Both of these seem unlikely at this point this year.”
