After months of acceleration in home price increases, the market has started to slow. In some places, it has slowed considerably. There are a few places in America where the problem has become severe. The trouble is most acute in areas around New York City and Chicago.
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The slowdown of home price increases recently was pointed out in the widely regarded S&P Case-Shiller home price index. After months in which the national index rose between 18% and 20% year over year, that slowed to 15.8% in July. Craig J. Lazzara, managing director at S&P DJI, said, “Although U.S. housing prices remain substantially above their year-ago levels, July’s report reflects a forceful deceleration.”
While few people are deeply worried about the value of their homes, the primary drivers of home price increases have weakened. Mortgage rates a year ago were about 3% for a 30-year fixed rate. That number has jumped to 6%. Simply stated, that makes buying a home much more expensive. A recent study showed that 60% of home price gains over the past two years were due to the fact people could work from home. The COVID-19 pandemic had one positive side effect.
ATTOM, the real estate data company, recently released its Special Housing Risk Report. It was created from data collected from the second quarter. Among the factors considered were home affordability, unemployment, underwater mortgages and foreclosures. A total of 575 counties were included. Among the counties in the most trouble were those where residents had to put substantial amounts of their income toward housing.
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