U.S. Home Prices Record First Annual Decline in More Than Three Years

U.S. home prices recorded their first annual decline in more than three years in late October, while rents moved higher, marking a reversal across two measures of housing costs.

The median U.S. home sale price was 0.1% lower year over year across the four weeks ending Oct. 25. October’s national median rent, by comparison, advanced 0.1% from a year earlier. The sale-price change was its first yearly decline in more than three years; rents had also gone more than three years without an annual increase. The measurements cover different periods: a four-week span for sale prices and the full month of October for rents.

Borrowing conditions remain difficult for buyers even as mortgage rates retreated somewhat in recent weeks. Rates were still about one percentage point above their year-earlier level, leaving the typical homebuyer’s monthly payment near its second-highest mark on record. High rates and economic uncertainty have kept activity subdued in the for-sale market for several months.

Pending home sales, which count signed contracts on existing homes before closing, continued to decline in recent weeks. The September reading reached a 25-year low, while completed sales measure transactions after closing. The two indicators therefore describe different stages of the purchase process. The contract measure’s September decline was accompanied by a drop in new listings, which reached their lowest level since the start of this year.

As buyers pull back and available supply rises, sellers have lost some pricing leverage. Many can no longer command the amounts they want. With the for-sale market stalled, more renters are staying put, while an earlier oversupply of new apartments had weighed on rents.

The national multifamily vacancy rate was 7% in October. It remained elevated compared with long-term norms, though it has fallen since reaching a peak earlier this year.

Rent trends varied by market. The San Francisco Bay Area led the country with 13.1% annual growth, followed by San Jose. Austin, Phoenix and Tampa were beginning to recover, while Phoenix, Las Vegas and San Antonio still ranked among the markets with the steepest rent declines.