Home prices have cooled at the fastest rate in the index’s history

US home prices fell in July at the fastest rate in the history of the S&P CoreLogic Case-Shiller Index, according to a report released Tuesday.

Home prices in July were still higher than they were a year ago, but pulled back significantly from June’s gains. Nationally, prices rose 15.8% during July 2021, well below the 18.1% increase in the previous month, according to the report.

The 10 City Composite, which measures prices in major metropolitan areas such as New York and Boston, rose 14.9% year over year, down from 17.4% in June. The 20-City Composite, which adds areas like the greater Seattle and Detroit metro area, was up 16.1%, down from 18.7% the previous month. July’s year-over-year gains were lower compared to June in each of the cities covered by the index.

“The July report reflects a strong slowdown,” Craig J. Lazzara, managing director of S&P DJI, wrote in a statement, noting the divergence in annual gains in June and July. The difference of 2.3 percentage points “between the two monthly profit rates is the largest slowdown in the index’s history.”

Tampa, Florida, Miami and Dallas saw the highest annual gains among the 20 cities in July, with increases of 31.8%, 31.7% and 24.7%, respectively. Washington DC, Minneapolis and San Francisco saw the smallest gains, but they were still well above last year’s levels.

Another report from the National Association of Realtors showed home prices fell significantly from June to July. Prices usually fall during that period, due to the strong seasonality of the housing market, but the decline was three times the average decline historically.

The share of homes that cut prices was about 20% in August, as it was in 2017, according to Realtor.com.

“For homeowners planning to list, the market today is very different from the market even 3 weeks ago,” said George Ratio, chief economist and director of economic research at Realtor.com.

Home prices are dropping due to significantly poor affordability due to the rapid rise in mortgage rates. The average 30-year fixed-rate mortgage started this year around 3%, but by June it had briefly crossed 6%. It remained in the 5% high range throughout July and is now trending around 7%, making the average monthly payment about 70% higher than it was a year ago.

“As the Federal Reserve continues to raise interest rates, mortgage financing has become more expensive, a process that continues to this day. Given the prospects of a more challenging macroeconomic environment, home prices may continue to slow,” Lazarra said.