US home prices continued to gain ground in August, but the pace of growth slowed considerably as rising mortgage rates pushed more prospective buyers out of the market. Home prices rose 13% in August from the year before, a smaller jump than the 15.6% growth seen in July and 18.1% pace in June, according to the S&P CoreLogic Case-Shiller US National Home Price Index. The drop between July and August was the largest deceleration in the history of the index going back to 1987, surpassing the previous record a month prior. July also marked the first month-over-month decrease for the national index since February 2012 and that continued in August, with seasonally adjusted prices falling 0.9% month-over-month. “These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since,” said Craig J. Lazzara, managing director at S&P Dow Jones Indices. All 20 cities tracked by the index reported smaller price increases in August compared to the prior year. But despite the ongoing deceleration, August’s housing prices remain well above year-ago levels in all 20 cities. Miami notched the biggest gains, with home prices rising 28.6% in August from the year before. It was followed by Tampa, which was up 28%, and Charlotte, with a 21.3% increase. However, the pace of price appreciation is decreasing in those cities as well. Price growth was strongest in the Southeast, which was up 24.5% from a year ago, and in the South, which was up 23.6%. But annual price growth is expected to continue to decrease and some areas may start seeing year-over-year declines. “As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable,” said Lazzara. “Home prices may well continue to decelerate.” Month over month, all 20 cities saw prices decline in August from July with the biggest drops happening in the West. Home prices in San Francisco were down 4.3% in August from the month before, followed by Seattle (down 3.9%) and San Diego (down 2.8%). A separate report from the Federal Housing Finance Agency also released Tuesday showed a similar trajectory in home prices in August. The FHFA House Price index, which measures changes in single-family home values, reported that home prices rose 11.9% year-over-year in August, and fell 0.7% from the previous month. In July, the index showed the first monthly decline in home prices since May 2020, the agency said. August’s drop marked the first time since March 2011 that the index has seen two consecutive months of decline. “Higher mortgage rates continued to put pressure on demand, notably weakening house price growth.” said Will Doerner, supervisory economist in FHFA’s division of research and statistics. The average rate for a 30-year, fixed-rate mortgage is currently 6.94%, double what it was at the start of the year. But affordability has worsened since August, when rates were a full point lower. The drop in home price appreciation in August captures the late-summer slowdown in home shopper activity, said George Ratiu, senior economist and manager of economic research at Realtor.com. “For homebuyers, the impact of higher rates was compounded by inflation running at a four-decade high, resulting in less money in their pockets and diminished budgets,” said Ratiu. “The sharp pullback in demand was reflected in dropping sales and decelerating home prices.” Since August, other indicators have shown that the housing market is cooling. With mortgage rates climbing to nearly 7% – a level not seen in 20 years – home sales have dropped and builders have pulled back on the construction of new homes. “With monthly mortgage payments 75% higher than last year, many first-time buyers are locked out of housing markets, unable to find homes with budgets that have lost $100,000 in purchasing power this year,” said Ratiu.