• House prices fell for the fifth consecutive month in November.
• PNC expects a decline in mortgage rates in 2023.
• PNC forecasts a 12% year-over-year decline in house prices in 2023.

House price appreciation in November, as measured by the S&P CoreLogic Case-Shiller National Composite Index fell 0.3% (after seasonal adjustments) in November from October, following a 0.2% decline in October. This marked the fifth straight monthly decline. Annual house price appreciation decelerated to 7.7% in November, the slowest pace in over two years, from 9.2% in October. The S&P CoreLogic Case-Shiller 20-City Index recorded a 6.8% gain in November versus November 2021, down from 8.6% in October. The sharpest monthly declines from the prior month were in Las Vegas (1.2%), Phoenix (1.4%), and San Francisco (1.4%).

House price growth decelerated in November on a year-over-year basis in all 20 cities tracked by the index. Five of the 20 cities reported double-digit annual price increases. Miami (18.4%), Tampa (16.9%), and Atlanta (12.7%) reported the strongest annual gains while Los Angeles (4.4%), Portland (4.0%), and Seattle (1.5%) reported the weakest annual gains. House prices declined on a year-over-year basis in San Francisco.

The housing market downturn continued in November as higher mortgage rates and deteriorating affordability priced out potential homebuyers. The average on a 30-year fixed mortgage rate peaked at around 7% in November but home financing costs have retreated in recent months thanks to better inflation prints, rising recession fears, and a less hawkish Fed.

The housing sector correction will likely continue through 2023 but there is some good news for potential homebuyers. Strong wage growth from the labor market and declining mortgage rates will provide some support to demand and unusually low supply should limit house price declines. PNC’s baseline forecast expects house prices to decline 12% in 2023.