House prices slightly down by 0.64% during 2022

After nine years of strong house price growth, the U.S. housing market is now showing signs of slowdown, amidst falling demand and weakening economy. The S&P/Case-Shiller seasonally-adjusted national home price index fell slightly by 0.64% y-o-y in 2022 (inflation-adjusted), following annual increases of 11.09% in 2021 and 9.01% in 2020. It was its worst showing since 2011.

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 a meager 1.22% during 2022 (inflation-adjusted), a sharp slowdown from the prior year’s 10.49% growth.

The S&P/Case-Shiller index fell by 0.87% q-o-q in Q4 2022, while the FHFA index declined slightly by 0.03%.

Demand and sentiment falling amidst increasing mortgage rates, building costs

In December 2022, existing home sales – completed transactions that include single-family homes, townhomes, condominiums and coops – dropped 34% from a year ago, its eleventh consecutive month of decline, according to the National Association of Realtors (NAR). For full year of 2022, existing home sales totalled 5.03 million, down by 17.8% from the previous year. Likewise, sales of new single-family houses fell by 16.4% y-o-y to 644,000 units in 2022, according to the U.S. Census Bureau.

The U.S. homebuilder sentiment stood at 44 in March 2023, up by 2 points from the previous month but still far below prior year’s 79, amidst persistently high inflation and rising interest rates, and 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 has deteriorated sharply last year 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.

Rents, rental yields: moderate yields in New York, at an average of 4.78%

U.S.: city centre apartment, buying price, monthly rent (2-BR apartment)
	Buying price	Rate per month	Yield
Manhattan	$2,324,000	$5,700	2.94%
Queens	$  739,000	$2,600	4.22%
Brooklyn	$1,025,000	$2,750	3.22%
Staten Island	$  429,950	$2,200	6.14%

Recent news: During 2022, the U.S. economy expanded by 2.1% from a year earlier, a slowdown from an annual growth of 5.9% in 2021, primarily driven by increases in consumer spending, exports, private inventory investment and nonresidential fixed investment, according to figures released by the Bureau of Economic Analysis (BEA). 

The world’s biggest economy will slow further in the medium term, with a projected real GDP growth rate of 0.7% in 2023 and 0.9% in 2024, amidst persistent inflation and rising interest rates, based on forecast released by The Conference Board.  This is in line with the World Bank’s 2023 growth forecast for the U.S. economy of just 0.5%.