Home Prices Are Up -- But They've Slowed Down Since the Summertime Peak

A man and woman meeting their realtor at the front door of a house with a For Sale sign out front.

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Home prices rose in September, but at a slower pace than in August.

Key points

  • Home prices rose 19.5% in September compared to the previous year.
  • That's a substantial increase, but it's a lower one than we saw in August.

It's not a secret that homes have been overwhelmingly unaffordable since the start of the year. We can largely thank low inventory for that, coupled with intense buyer demand.

In September, U.S. home prices rose 19.5% on a year-over-year basis, according to the S&P CoreLogic Case-Shiller National Home Price Index. That sort of gain is clearly substantial.

But there's some good news buried in that figure. September's annual gain was actually lower than home price gains in August, which were measured at 19.8% from the previous August. In fact, September is the first month that saw a decrease in annual home price gains since May 2020.

Positive news for home buyers?

Many buyers have struggled to break into the housing market this year. With home prices being so high, first-time buyers in particular have struggled with affordability -- even though mortgage rates have sat at attractive levels since the start of the year.

September's slightly lower annual home price gain could be an indication of a continuing trend -- home values could drop month after month so that at some point in 2022, they'll be a lot more affordable than they are today. But that's not guaranteed to happen.

The factor most likely to influence home prices is inventory. If more homes hit the market in the coming months, there will be more supply to meet buyer demand. That could lead to fewer bidding wars across the broad housing market, which could help home prices come down.

Whether more sellers list their homes in 2022 is yet to be determined. A big reason many have held off stems from concerns over the U.S. economy and pandemic. While the former is now in much better shape than it was a year ago, the pandemic is, unfortunately, still raging. In fact, the recent emergence of the omicron variant could prompt homeowners who were looking to list in early 2022 to rethink those plans.

Preparing to buy a home in 2022

Even if home prices steadily decline on a monthly basis, they're currently sitting at very high levels. A modest decrease may not do much to help buyers on a budget.

Still, if you're hoping to purchase a home in the near term, there are steps you can take to gear up. First, aim to bring a 20% down payment to the table so you can avoid private mortgage insurance. Next, boost your credit score so you're in the best position to snag an affordable interest rate on a mortgage.

Finally, get a pre-approval letter to bring along on your house hunt. That could give you an edge over other buyers if you have competition on a home you want to make an offer on.

The fact that home price gains have slowed down a bit is a good thing for buyers. Let's see if that trend continues into 2022 and how significantly it impacts those looking to purchase a place of their own.

Our Research Expert