The decline in U.S. home prices that began in June last year continued for the sixth straight month at the end of 2022, with higher mortgage rates weighing down December’s home price gains.

Tuesday morning’s S&P Case-Shiller report showed that the National Composite declined -0.8% month-over-month in December and now stands 4.4% below its June peak. 

Home price sales declined in all 20 major U.S. cities with a median decline of 1.1%, according to the report’s 20-city composite but still ended the year with the national composite rising an impressive 5.8% though still well below 2021’s 18.9% record-setting gain. Cities in the southeast particularly saw continued home price increases, with Miami, Tampa, Florida, and Atlanta up in the double digits for percentage price gains, 15.9%, 13.9%, and 10.4%, respectively. 

The biggest city losers were located on the west coast, with San Francisco continuing its decline with prices down -4.2% year-over-year and its neighbors Seattle and Portland down -1.8% and Portland up only 1.1%

While the Case-Shiller indicates home prices have continued to cool off, albeit slowly, prices and mortgages continue to be expensive, and it’s not enough to draw in many buyers as of yet. While the FED is hitting the breaks on inflation, the housing market freight train still has a lot of momentum that needs contending with before prices start to decline.  That, paired with continued low inventory and a looming recession on the horizon, leaves prospective homebuyers waiting for better market conditions and a less precarious economy.

“Regardless of the prices decelerating, I think it’s really difficult to enter the market right now because home prices are still very expensive,” said skeptic Eliza Winger, an economist with Bloomberg. “On top of that, there are no houses available. Inventories remain really low because people who do own homes want to avoid exchanging their mortgage rate for a higher one.” 

Home sales did spike 8.1% nationally in January from December, according to the National Association of Realtors Pending Sales report that came out on Monday, the day before Case-Shiller’s. The report is widely considered the most current indicator of housing demand and is based on real estate contracts that were signed for existing single-family homes, condos, and co-ops a month or two before they sell. 

At first glance, this might offer a glimmer of hope that buyers are starting to return to the market; however, this jump is likely related to the 30-year fixed mortgage interest rate pulling back to 6% in January. As of last Friday, it was back up to 6.88% leaving some economists to doubt that sales will continue at the same rate in the coming months.

These rising mortgage rates have been a direct and intentional result of Federal Chair Jerome Powel’s ongoing effort to combat rampant national inflation by raising the federal rate and making it more costly to borrow money across many sectors, in this case, encouraging home sellers to lower their prices to make them more affordable.