US Housing Market Sees Slowest Growth Since Early 2024 Amid Economic Uncertainty
Annual price growth decelerates to 0.5% as inflation concerns and mortgage rate pressures impact buyer confidence.
The pace of U.S. house price growth has slowed to its lowest point since early 2024, with annual price increases falling to just 0.5% in October. This marks a decrease from 0.8% in September and 1.6% in August, according to data from Nationwide.
The typical home in the U.S. is now valued at approximately $273,566, with average prices seeing a decline of $5,324 since April. This represents the weakest annual growth rate recorded by Nationwide since January 2024, indicating a year-on-year flatness in prices.
Robert Gardner, chief economist at Nationwide, attributed the slowdown in market activity and price growth to the uncertain economic backdrop. He cited ongoing geopolitical tensions, which are exerting upward pressure on energy prices and fueling inflation concerns. This, in turn, has led to expectations of increased bank rates, consequently affecting mortgage pricing.
The market dynamics indicate a shift towards a buyer's market, with more homes available for sale than there are interested buyers. Jonathan Hopper, a buying agent at Garrington Property Finders, noted that in many regions, buyers have ample choice and are less inclined to overpay when numerous alternative properties are available.
Further evidence of this trend comes from the Bank of England's latest figures, which show mortgage approvals for house purchases fell to 53,400 in September. This figure is below the average of approximately 58,800 seen in the preceding six months and represents a nearly 20% decrease compared to the previous year.
Experts anticipate that house prices may continue to decline in the coming months. Mark Harris, chief executive of mortgage broker SPF Private Clients, expressed concern that rising interest rates and the delayed launch of the government's 'Your First Home' scheme, intended to assist first-time buyers, will further dampen market activity. While the scheme is welcomed, its spring launch means it will not provide immediate relief for the current slowdown.
A recent survey by The Royal Institution of Chartered Surveyors (RICS) supports the expectation of falling prices, with a majority of RICS members reporting a decrease in house prices in their areas during September.
Despite the current downturn, some economists suggest a potential for market recovery. Robert Gardner of Nationwide believes that once the impact of higher energy bills subsides, the market could regain momentum. He pointed to the resilience of the broader economy, with accelerating economic growth, stable employment, and real incomes. Additionally, household balance sheets remain solid, with debt levels near 20-year lows relative to disposable income. Gardner also noted that the improvement in housing affordability over the past two years has only been partially reversed by higher market interest rates, as income growth has continued to outpace house price growth.