Home prices have dropped for first time in more than 2 years

Home prices are still elevated nationwide, but there are an increasing number of signs that the real estate market is starting to moderate.

In July, home prices fell by 0.6%, according to the Federal Housing Finance Agency's house price index published Tuesday. 

This is the first month-over-month decrease observed since May 2020 when the economy experienced pandemic-related lockdowns, said Will Doerner, supervisory economist in FHFA's division of research and statistics. 

The decline in prices was "widespread" impacting eight of the nine census divisions, said Doerner.

A previous FHFA report noted that between May and June, housing prices were still increasing, growing by a seasonally adjusted 0.1%. 

For the nine census divisions, the seasonally adjusted monthly house price changes from June to July varied from a decline of 1.6% in the Pacific division to an increase of 0.1% in the East North Central Division.

Overall, home prices grew 13.9% from July 2021 to July 2022.

Year-over-year, the changes were all positive, ranging from an increase of 10.0% in the Pacific division to a rise of 18.9% in the South Atlantic division, the report said.

"The 12-month change in house prices remains at historically high rates, but the rate of growth continues to moderate across all census divisions," said Doerner.

Concurrently, the S&P CoreLogic Case-Shiller national home price index published Tuesday also found that home prices are starting to dip. In July, home prices had a 15.8% annual gain in July, a decline from 18.1% the previous month, the report said.

Among the 20 cities that the index tracks, Tampa, Miami and Dallas reported the highest year-over-year gains in July, the S&P Corelogic report said.  All 20 cities reported lower price increases in the year ending July 2022 versus the year ending June 2022. 

Craig J. Lazzara, managing director at S&P DJI said July's report "reflects a forceful deceleration" of housing prices nationwide. "As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day," Lazzara said in a statement. " Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate."