Fannie Mae just published their Home Price Index for the third quarter. And while the general takeaway is no surprise to anyone who’s been paying attention, the findings are still worth a closer look. 

Year over year, home prices for single-family homes increased at a non-seasonally adjusted rate of 13.8%, down from the previous quarter’s growth rate of 19.1%. 

The index also marks quarterly changes in single-family home prices from Q2 to Q3: 

  • Seasonally-adjusted: home prices rose by 0.2% – the slowest since Q4 2011
  • Non-seasonally adjusted: home prices declined by 0.2% 

So, what’s behind the slow-down in price growth? And what does it mean for your clients?

Behind the home price growth deceleration

As Chief Economist Doug Duncan points out in his comment on the index results, the sharp rise in mortgage rates over the past several months has definitely impacted buyer and seller demand. 

Homeowners with low mortgage rates are hesitant to take on monthly payments hundreds more than they would have been early in the year—and more than they’re paying now. 

Rising inflation also makes it more difficult to rationalize paying more for housing, especially for those already building equity with the homes they currently own. 

That seller hesitancy is a significant contributor to the drop in new listings. And with fewer buyers actively shopping for homes, sellers and homebuilders alike may need to cut prices to compensate. 

Year-over-year home price growth decelerated in the third quarter, as the sharp rise in mortgage rates – and declining housing affordability – appears to have weighed further on demand. In addition to the greater affordability constraints for potential homebuyers, many existing homeowners likely feel ‘locked-in’ to their existing, lower interest-rate mortgages. This contributes to fewer homes being listed, as well as fewer potential buyers, and may lead to a growing share of listings having to cut prices to meet the reduced demand. Furthermore, the supply of completed, new single-family homes for sale has begun to rise, suggesting that homebuilders may also need to begin offering greater price concessions to move inventory. We expect these trends to continue in the coming months.

Doug Duncan

Fannie Mae SVP and Chief Economist

What is the Fannie Mae Home Price Index

Fannie Mae publishes their quarterly Home Price Index (FNM-HPI) around the middle of the first month of each quarter. 

The national indices—both seasonally and non-seasonally adjusted—serve as indicators of general price trends for single-family homes (excluding condos) across the U.S. 

The index is publicly available online as a quarterly series starting with Q1 1975 and extending to its most recent report (Q3 2022). 

Top takeaways for real estate agents

Even with rising mortgage rates, the drop in demand can help your homebuyer clients find and purchase a home they love. 

With rents steadily climbing, first-time homebuyers can benefit from buying a home in today’s market. Show them the data on national home price growth as well as data specific to your market to help them see the costs associated with buying a home versus continuing to rent. 

Be the guide your clients and community need to make the best decisions as buyers and homeowners. They’ll remember the agent who went above and beyond to keep them informed.