Home Price Growth in the U.S. Has Slowed, Says Moody’s Analytics

Introduction

As prospective buyers battle with affordability, the seemingly inevitable expansion of home prices in the United States is now slowing down, according to the most recent data from Moody’s Analytics, with decreases recorded last month in over half of all states.

According to the company’s most recent House Price Index, the nation’s house prices increased by 0.12 percent in March, the weakest monthly growth rate in over a year. However, prices were still 5.9 percent higher than they were a year earlier. In February 2023, house prices were 6.1 percent higher than in February 2023, and they had increased by about 0.2 percent from the previous year.

Beneath these figures lies a contradictory reality dividing the nation into regions where property values are rising steadily, and others have begun to decline. Prices decreased from a year ago in over 20 states and over half of the 403 metropolitan areas that Moody tracks. Prices increased in almost half of the states.

Detailed Analysis

According to Moody’s, states in the Northeast and Midwest had the best housing markets because the cost of homes there is comparatively lower. The three cities with the fastest rate of price growth among the nation’s ten largest metropolises are New York (+0.8%), Philadelphia (+0.5%), and Chicago (+0.6%). Meanwhile, struggling cities were concentrated in the South and West and included Dallas (-0.3%), Washington, D.C. (-0.4%), Phoenix (-0.4%), and Miami (-0.4%).

These twenty-plus states had price declines in March compared to February: Minnesota (-0.01 percent), Tennessee (-0.05 percent), Arkansas (-0.06 percent), Iowa (-0.10 percent), Massachusetts (-0.11 percent), Washington (-0.15 percent), Utah (-0.20 percent), Georgia (-0.22 percent), Virginia (-0.25 percent), Texas (-0.31 percent), North Carolina (-0.46 percent), Arizona (-0.48 percent), Missouri (-0.56 percent), Florida (-0.59 percent), South Carolina (-0.71 percent), Colorado (-0.77 percent), Oregon (-0.79 percent), Kansas (-1.32 percent), Vermont (-1.77 percent), Mississippi (-2.22 percent), Montana (-2.48 percent), and the District of Columbia (-3.39 percent).

All 50 states and the District of Columbia had price rises over the previous year; the only state where prices decreased was Mississippi, where they fell by 1.02 percent between March 2023 and March 2024.

“Home values in the South and West are declining. Since the epidemic started, home values have significantly increased in both locations, creating a gap between current home prices and what economic fundamentals have historically supported, according to Matthew Walsh, housing economist at Moody’s Analytics, who spoke with Newsweek.

“These overpriced states see more downward pressure on prices as mortgage rates rise nationally and affordability falls. In addition, homeowners are starting to feel the effects of a dramatic increase in insurance costs in several Southern states. Consequently, active inventories are increasing in areas such as the Gulf Coast region of Louisiana and Florida.”

The New Realities of the U.S. Housing Market

Although a price fall is welcome news for prospective homeowners, the real reason for the decline is that people are being priced out of the market by high prices and mortgage rates.

“With the rate on a 30-year fixed mortgage averaging close to 7 percent over the month, many potential buyers have been priced out of the market,” Walsh stated. “Annual price appreciation ticked lower over the month, rising 5.9 percent, compared to 6.1 percent in February.”

At the national level, single-family attached residences, excluding condominiums, had a 0.1 percent decrease in price in March compared to February, while condominium prices increased by 0.2 percent.

“Should the Fed act as expected and cut interest rates in the coming months, the rate on a 30-year fixed mortgage should decline slightly in the second half of this year,” said Walsh. “Even so, the decline in mortgage rates will be slow, with the 30-year fixed mortgage rate forecast to fall only to around 6.5 percent by the end of 2024.”