US annual home prices rise again, signalling ongoing housing market recovery: FHFA report

The latest data from the Federal Housing Finance Agency (FHFA) revealed a continuous uptick in annual home prices, indicating a sustained recovery in the US housing market.

According to the FHFA report released on Tuesday, annual home prices in October registered a growth of 6.3 per cent, up slightly from a revised 6.2 per cent in the preceding month. This resurgence in annual price growth commenced in June, reversing a steady decline observed since February 2022. On a month-to-month basis, prices increased by a moderate 0.3 per cent, following a 0.7 per cent climb in the previous month.

The housing market's performance in October occurred against the backdrop of interest rates on the most common home loans approaching 8 per cent, marking a two-decade high. This surge in rates was attributed to the Federal Reserve's rate hike cycle.

The Federal Reserve maintained its policy benchmark interest rate for three consecutive meetings, fueling expectations of an imminent end to the rate hike cycle and triggering a rally in the bond market. As a result, the average rate on a 30-year fixed-rate mortgage dipped below 7 per cent in December, with yields on mortgage-backed securities following suit.

The softening interest rates have contributed to a modest increase in existing home sales, which rose by 0.8 per cent in November, as revealed in a National Association of Realtors report released in December. The report suggests that the more favorable rates may encourage sellers to enter the market, potentially expanding the inventory available to prospective buyers.

Regionally, the FHFA report highlighted the Mid-Atlantic and New England regions as experiencing the most significant gains in October, with growth rates of 9.9 per cent and 9.7 per cent, respectively. These regional variations underscore the dynamic nature of the housing market's recovery across different parts of the country.

(With Reuters inputs.)