Home prices continued to climb in August

Home prices accelerated once more in the month of August, a pair of monthly indices reported. However, elevated interest rates are expected to slow the pace of growth going forward.

House prices rose by 0.6% from the previous month, a monthly index published by the Federal Housing Finance Agency Tuesday shows. On a year-over-year basis, they were up 5.6%, with the increase largely credited to a lack of inventory in the market.

For the nine census divisions tracked, the seasonally adjusted monthly house price changes from July to August varied from a decline of 0.2% in the South Atlantic division to an increase of 1.1% in the Pacific and East North Central divisions.

"U.S. and regional house price gains remained strong over the last 12 months." said Dr. Nataliya Polkovnichenko​, supervisory economist in FHFA's division of research and statistics, in a press release. "The South Atlantic division showed moderate weakness in August, while the remaining census divisions posted positive price appreciation from the previous month."

Meanwhile, the S&P CoreLogic Case-Shiller national home price index found the non-seasonally adjusted month-over-month index posted its seventh straight month of gains, up 0.4% in August and up 3.4% year-over-year. From the beginning of the year to now, home prices grew by 6.4%, the report stated.

But mortgage rates are likely to slow this upward trajectory, according to Selma Hepp, chief economist at CoreLogic. Mortgage rates crept up to 7.79% for the week of Oct. 26, up from 7.63% seven days prior and 7.08% one year ago. 

"Although housing prices have increased significantly this year, climbing 5% from the early-year low, higher mortgage rates and seasonal trends will slow further monthly gains – with some possible declines in winter months," said Hepp in a press release. "Nevertheless, the year-to-date gains indicate that growth will pick up through the end of 2023 compared to last year's slump during this time period."

Miami and New York posted the largest monthly gains in August, with a 1.2% and 1.1% increase respectively, while San Francisco posted the largest dip in house prices, down by 0.5%, CoreLogic's report said. West Coast markets saw the strongest price accelerations, particularly in the Seattle, San Francisco, Los Angeles and San Diego metro areas.