US housing price slowdown continues as mortgage financing poses headwind

U.S. home prices rose 9.2% year over year in October 2022, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.

Despite the annual rise in home prices during the month, the price hike was still weaker compared to the index’s 10.7% year-over-year increase in September 2022. U.S. home prices are expected to remain under pressure as “mortgage financing continues to be a headwind for home prices,” said Craig Lazzara, managing director at S&P Dow Jones Indices.

Home price drop continues; Miami leads the way

The 20-City Composite Index posted a year-over-year increase of 8.6%, compared to 10.4% in the previous month, even as housing prices continued to slow down in all 20 cities covered in the index.

The 10-City Composite Index increased 8.0% year over year, weaker than the 9.6% rise seen in September 2022.

Miami continued to lead the way as the biggest gainer across all 20 covered cities, with an annual home price increase of 21.0%. Tampa, Fla., was second on the list, with a 20.5% year-over-year price gain. Charlotte, N.C., took the third spot with a 15.0% increase in home prices during October.

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Homebuilder stocks under pressure; mortgage originations fall

U.S. homebuilder stocks remained under pressure with the median one-year total return recording a negative 26.7% as of Jan. 4.

Taylor Morrison Home Corp.’s shares performed better compared to the rest of the homebuilding sector, posting a one-year total return of negative 5.7%. The company sold 13,133 homes over the 12 months prior to Sept. 30, 2022, a 5.1% increase from the year-ago period.

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First Republic Bank and PNC Financial Services Group Inc. were the only mortgage lenders among the top 20 to experience a year-over-year increase in residential mortgage originations for the first nine months of 2022, despite the 32.8% year-over-year drop in the total residential mortgages originated in the U.S. to $2.405 trillion.

First Republic’s year-to-date mortgage loan originations rose 18.9% to $24.52 billion, while PNC Financial posted an increase of 8.9% to $22.43 billion.

Rocket Mortgage LLC continued to be the top residential mortgage lender, originating $105.41 billion in home loans through September. However, this represented a 58.7% drop from the same period in the previous year.

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New single-family home sales in the U.S. increased 5.8% on a monthly basis to a seasonally adjusted annual rate of 640,000 units in November 2022, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. However, new home sales declined 15.3% on an annual basis.

The Midwest and West were among the regions to have a monthly increase in sales of new single-family homes.

Existing home sales fell month over month and year over year in November 2022, declining 7.7% from the previous month and 35.4% from a year ago, according to the National Association of Realtors.

In November 2022, the residential real estate market resembled the sales activity observed during the COVID-19 economic lockdowns in 2020, NAR Chief Economist Lawrence Yun said in a Dec. 21 news release. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows,” Yun said.

Privately owned, single-unit housing starts were down 4.1% from October 2022 and 32.1% on a yearly basis.

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