October marks the fifth consecutive month of decline for Pending Home Sales, which reported 37% lower than October 2021. This critical report is a great reading of the pulse of the housing market, as it counts signed contracts of existing homes (about 90% of the market). No doubt, the 20-year-high mortgage rates played a big role in the decline. If inflation continues to subside, we should see buyers start to return.
The preferred measure of appreciation, the Case-Shiller Home Price Index, released the September report, showing a decline of 1% in home prices despite them being more than 10% higher than in September 2021.
The Federal Housing Finance Agency (FHFA) also released its House Price Index, tracking appreciation for single-family homes with conforming loans, showing a rise of 0.1% in September and 11% annually.
The losses in home prices seem to have been for higher-priced homes and in larger cities like Seattle (-2.9%), San Francisco (-2.9%), San Diego (-2.1%), Denver (-2.0%), and LA (-1.8%). We can expect to see a further decline as the peak in mortgage rates had not yet happened in September, but again, we will likely see those numbers come back up as buyers return to the market with lower mortgage rates.
Last week, we saw the second reading of Q3 GDP and, to our surprise, it showed that the U.S. economy grew by 2.9%! This is better than the 2.7% expected but we have not received the final reading for Q3, so it is important to remember that significant revisions are still possible. The final reading for third-quarter GDP will be reported on December 22.
The housing and economic calendar is quiet this week but will be highlighted by the latest Producer Price Index on Friday, which will give us an update on wholesale inflation for November.