US Home Prices Remain High as Mortgage Rates Increase

The housing market is facing an escalating affordability crisis as mortgage rates rise again, following The Federal Reserve's rate cuts. The latest data from S&P CoreLogic's Case Shiller, released today, shows that home prices in the top 20 cities in America increased by 0.35% month-on-month (MoM) in August, surpassing the expected 0.20%. Despite this increase, year-on-year (YoY) home prices only rose by 5.2%, a decrease from July's 5.93%. This marks the fifth consecutive month of YoY growth slowdown.

Home Prices Near Record Highs

Although this is the lowest YoY growth since September 2023, home prices remain close to record highs. The rate of home price appreciation continues to follow the trend of bank reserves at The Federal Reserve, decreasing on a lag.

Impact of Federal Reserve's Rate Cuts

Interestingly, as home price appreciation begins to slow down, which could potentially improve affordability, The Federal Reserve has cut interest rates. This move is expected to stimulate home prices once again. However, despite the initial decrease in mortgage rates, they have recently surged back above 7.00%.

Potential for Another Housing Bubble

The question now is whether The Federal Reserve will trigger another housing bubble and re-inflate the Consumer Price Index (CPI) in a manner reminiscent of the 1970s.

Bottom Line

The rising mortgage rates and near-record high home prices present a significant challenge to the housing market's affordability. The Federal Reserve's rate cuts, which were initially expected to stimulate home prices, have not prevented mortgage rates from surging. This situation raises questions about the potential for another housing bubble and its impact on the CPI. What are your thoughts on this situation? Feel free to share this article with your friends and discuss it further. Remember, you can sign up for the Daily Briefing, which is available every day at 6pm.