House prices up 8.18% during the year to Q2 2022
After nine years of strong house price growth, U.S. house prices continue to rise, albeit at a slower pace, amidst falling demand and slowing economy. The S&P/Case-Shiller seasonally-adjusted national home price index rose by 8.18% y-o-y in Q2 2022 (inflation-adjusted), following annual increases of 10.12% in Q1 2022, 10.38% in Q4 2021, 12.6% in Q3 2021 and 12.26% in Q2 2021.
This is supported by figures released by the Federal Housing Finance Agency, which showed that its seasonally-adjusted purchase-only U.S. house price index rose by 8.31% y-o-y in Q2 2022 (inflation-adjusted), down from the prior year’s 12.26% growth.
The S&P/Case-Shiller index rose by 0.24% q-o-q in Q2 2022, while the FHFA index increased 0.98%.
Demand and sentiment falling amidst increasing mortgage rates, building costs
In July 2022, existing home sales fell sharply by 20.2% from a year earlier to a seasonally-adjusted annual rate of 4.81 million units, based on figures from the National Association of Realtors (NAR). Likewise, sales of new single-family houses fell by 29.6% y-o-y to a seasonally-adjusted annual rate of 511,000 units in July 2022, according to the U.S. Census Bureau.
U.S. homebuilder sentiment fell for an eight straight month to 49 in August 2022, the lowest reading since May 2020, amidst rising mortgage rates and building materials costs, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). A reading of 50 is the midpoint between positive and negative sentiment.
Housing affordability continues to deteriorate with mortgage rates reaching their highest level since 2009 and asking prices continue to rise. The persistent increase in the prices of building materials is aggravating the situation.
“We’re in a cyclical decline due to the rising mortgage interest rates,” said NAHB Chief Economist Robert Dietz. “We do have to build more housing, but with interest rates where they are now, you are going to have this temporary pullback in housing demand. We're going to have to build our way out of a larger structural deficit.”
Rents, rental yields: poor yields in New York at 2.91%
New York apartment costs are very high, at around $17,191 per sq. m.
| U.S.: city centre apartment, buying price, monthly rent (120 sq. m.) | |||
| Buying price | Rate per month | Yield | |
| New York | $2,037,340 | $4,942 | 2.91% |
Recent news: In Q2 2022, the U.S. economy contracted by an annual rate of 0.6%, following a year-on-year decline of 1.6% in the previous quarter, technically entering a recession, according to the second estimate released by the Bureau of Economic Analysis (BEA).
As such, the International Monetary Fund (IMF) recently downgraded its 2022 growth projections for the world’s biggest economy to 2.3%, a 1.4 percentage points decline from its initial estimate, amidst surging inflation, coupled with the fallout from the Russian invasion of Ukraine. The U.S. economy grew strongly by 5.7% in 2021, following a 3.4% contraction in 2020 due to the Covid-19 pandemic.