U.S. Housing Prices Fall for First Time in a Decade

Say goodbye to the housing bull run. U.S. home prices—for the first time in a decade—are falling.

A national measure of prices in 20 large cities fell 0.44% in July, the first drop since March 2012, the S&P CoreLogic Case-Shiller index showed Tuesday. The last real estate crash ended in 2012, ushering in 10 years of price gains, capped off by the two-year pandemic buying frenzy.

But the Federal Reserve has put a swift end to the party as it fights to curb inflation. Mortgage rates this year doubled, pricing out many buyers and causing sales to plunge. Now values are heading south. The biggest month-over-month declines in July were in San Francisco (-3.6%), Seattle (-2.5%) and San Diego (-2%).

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“The cooling has come hard and fast,” Stephen Stanley, chief economist at Amherst Pierpoint, said in a note.

To be sure, prices remain high. The Case-Shiller national index jumped 15.8% year-over-year in July. But that was the smallest gain since April 2021, and the slowdown from the 18.1% jump in June was the largest deceleration in the history of the index.

There are also signs that there is plenty of pent-up demand for housing. U.S. sales of new homes surged unexpectedly in August, government data showed Tuesday.

It was the strongest pace of new-home sales since March, perhaps reflecting a race by buyers to beat further increases in borrowing costs and take advantage of price cuts by some builders. New-home sales rose in all regions, including a 29.4% jump in the South, where the pace was the firmest this year.

The declines in home prices have been steepest in the most unaffordable locations, especially on the West Coast, where buyers were already strained early this year when rates were still near historic lows.

The falloff looks extreme compared with the two-year pandemic frenzy, marked by multiple offers and a shortage of listings that drove buyers to bid high.

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Now listings are lingering longer because demand has collapsed, adding to the active inventory. One thing may help to keep prices elevated: fewer homes are coming on the market.

Homeowners who don’t have to move are staying put. Buying a house for most requires giving up a cheaper mortgage. A recent report from Zillow Group Inc. showing that new listings slid almost 23% in August from a year earlier.

Meanwhile, the Federal Reserve continues to move interest rates upward, Lazzara said.

“Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate,” he said.

—With assistance from Christopher Anstey and Vince Golle.