Supply Shortage is the Cause
High Interest Rates Reduce Existing Listings
Amid persistently high interest rates, U.S. home prices have continued to rise for six consecutive months. The shortage of supply caused by a decrease in existing home listings due to high interest rates is analyzed as the reason for the increase in home prices.
According to the S&P Dow Jones Index announcement on the 26th (local time), the U.S. 'CoreLogic Case-Shiller' home price index for July rose 0.60% compared to the previous month. It increased 0.98% compared to the same period last year.
This index, which measures the average home price trends in major U.S. cities, had declined from June last year to January 2023 on a month-to-month basis but has been on an upward trend for six consecutive months since February.
Due to the sharp rise in mortgage rates, demand to sell current homes and buy new ones has not materialized, resulting in a continued shortage of existing home inventory.
Housing construction activity, which had been sluggish during the pandemic, has led to a shortage of new home supply, with the current supply of new homes reduced to half the level of July 2019, before the pandemic.
Looking at the annual home price increase rates by major cities, Chicago recorded the highest at 4.4%, followed by Cleveland at 4%. Las Vegas saw a 7.2% decrease compared to the previous year.
Craig Lazzara, Managing Director at S&P Dow Jones, said, "The housing market's strength could be dampened by rising mortgage rates and weakening growth," but added, "The breadth and intensity reflected in this indicator align with an optimistic outlook for future market conditions."
According to Freddie Mac, a U.S. government-sponsored mortgage company, the average interest rate for a 30-year fixed-rate mortgage was 7.19% as of the 21st. This is the highest rate level since December 2000.
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