Home Appreciation Comes in Under Expectations

Even in light of the traditional real estate market cooling that takes hold of the market around this time every year, annual home price growth still pulled back in year-end data, now growing at a rate of 9.2%—down from third quarter projections of 13.1%—according to Fannie Mae’s latest Home Price Index (HPI). 

The index takes into account the quarterly price change for all single-family properties in the United States, excluding condos. 

On a quarterly basis, home prices rose a seasonally adjusted 0.2% during the fourth quarter of 2022, just above the 0.1% of growth recorded last quarter. On a non-seasonally adjusted basis, home prices declined by 1% during the fourth quarter. 

"The rise in mortgage rates over the past year and record inflation have constrained the purchasing power of prospective homebuyers," said Mark Palim, Fannie Mae VP and Deputy Chief Economist. "The resulting affordability pressures are evident in the home price declines of the past two quarters, along with the downturn in homes sales.” 

“The rise in rates also exacerbates the 'lock-in effect' in which existing homeowners who have rates well below current market rates have a financial disincentive to give up their current mortgage and purchase a different home at a higher mortgage rate, thereby reducing the supply of homes available for sale,” Palim continued. “We believe that a key factor that will impact home prices in 2023 is how the tension between a reduced supply of homes available for sale and lower mortgage demand is resolved." 

The FNM-HPI is produced by aggregating county-level data to create both seasonally adjusted and non-seasonally adjusted national indices that are representative of the whole country and designed to serve as indicators of general single-family home price trends. 

Click here to view Fannie Mae’s source material.