US Home-Price Growth Slows Most on Record as Market Hits Brakes

The US housing market’s sudden reversal is sapping demand and pushing prices down the most since 2009.

A measure of prices in 20 large US cities in August fell 1.3% on a month-over-month basis, the most since March 2009, according to the S&P CoreLogic Case-Shiller index. That’s the second-straight month of declines.

The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high in many cities compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retreated.

“The forceful deceleration in US housing prices that we noted a month ago continued,” Craig Lazzara, a managing director at S&P Dow Jones Indices, said in the statement. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate.”

While prices are still up year-over-year, they’re slowing at a record pace. A national measure of prices increased 13% in August from a year earlier, down from a 15.6% gain in July, the biggest deceleration in the history of the index.

Cities on the West Coast have been among those hit the hardest by the real estate cooldown, in part because of the affordability issues that have ratcheted up in recent months with higher rates. On a month-over-month basis, cities on the West Coast including San Francisco, Seattle and San Diego fell the most.

The market’s shift in recent months has started to cool the pandemic boom, when houses were quickly snapped up. Sales of existing homes fell for an eighth straight month in September, according to National Association of Realtors data, while new home construction also dropped in September, according to recent government data.

“As we move into the colder months of the year, we can expect further declines in home sales and continued downward adjustment in prices,” said George Ratiu, manager of economic research at Realtor.com.

Homebuilders have been hit by the sudden market slowdown. PulteGroup Inc. reported Tuesday that canceled deals spiked and third-quarter orders plunged as demand faltered.