The Great Deceleration, as told by one chart

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Back in January 2022, I wrote an article for Fortune Magazine titled “The Great Deceleration? The biggest jump in home prices is behind us—why housing appreciation will slow.” In the piece I argued that a looming mortgage rate shock meant that year-over-year national home price growth would likely decelerate and that history told us the deceleration could be abrupt.

It was abrupt.

A few months afterwards, mortgage rates shot up from 3% to over 6%, and home price growth did indeed begin to decelerate—fast. Some overheated housing markets, in particular in the Southwest and Mountain West, slipped into outright price corrections in the second half of 2022, while other parts of the country just held flat.

That mortgage rate shock saw year-over-year home price growth, as tracked by the Case-Shiller National Home Price Index, see its fastest-ever deceleration going from 20.8% in March 2022 to -0.4% in May 2023.

However, the deceleration in the year-over-year rate of national house prices has reversed. Going into 2023, a combination of seasonality, buyer acceptance, tight resale supply, and lack of homeowner distress has contributed to stabilizing national house price growth. As of July, U.S. home prices have increased by 1% on a year-over-year basis, and this figure is anticipated to rise in the months ahead. Goldman Sachs projects that the year-over-year rate will reach +3.5% by the end of December.

“After the one-two punch of skyrocketing mortgage rates and normalizing pandemic-fueled demand led to the sharpest slowdown in the U.S. housing market since the 2008 financial crisis, most national-level metrics of housing activity stabilized in 2023, home prices rebounded, and residential fixed investment is set to increase by 2% annualized in Q3,” Goldman Sachs wrote to investors on Sunday. “While the sharpest declines in housing activity and prices are now long behind us, the recent jump in mortgage rates and prospect that they could remain elevated for the foreseeable future present headwinds to the economy’s most interest rate sensitive sector.”

Among the 30 largest regional housing markets, 20 markets were down on a year-over-year basis in May 2023, according to the Zillow Home Value Index.

However, as of September, just 12 of those 30 major housing markets were still down on a year-over-year basis. While 18 major housing markets are now up on a year-over-year basis.

Up the most: Philadelphia, PA (+6.1%), Boston, MA (+6.1%), Miami, FL (+5.7%), Cincinnati, OH (+5.5%), and St. Louis, MO (-5.2%).

Down the most: Austin, TX (-10%), Las Vegas, NV (-4.4%), Phoenix, AZ (-4.2%), San Antonio, TX (-2.5%), and Sacramento, CA (-2.3%).