The pace of home-price growth slowed again in July, Cotality reported, falling to just over half of the rate of inflation in what could portend an unlocking of pent-up buyer demand if the Fed starts cutting interest rates as expected next week. 

U.S home prices rose 1.4% year over year to $405,000 after slowing to 1.7% in June, according to Cotality’s U.S. Home Price Insights report. July’s increase is significantly lower than the 2.7% rate of inflation recorded in July’s Consumer Price Index, Cotality noted.  

In the wake of recent economic reports showing a slowing economy, including August’s weak jobs report and a downward revision in the number of new jobs created through March, the U.S. Federal Reserve is expected to announce a cut to the federal funds rate after its Sept. 16-17 meeting. 

“Taken together, lower mortgage rates and lower home prices in many markets suggest improved affordability for a number of buyers who have been sitting on the sidelines for a long time,” Cotality Chief Economist Selma Hepp said in the report. 

Cotality cautioned that the slower national reading “glosses over pockets of growth” in half of the United States, particularly those in the Midwest that did not see a large run-up in prices during the pandemic, like Chicago; Indianapolis; Cleveland; Tulsa, Oklahoma; and Louisville, Kentucky. Markets in Florida and the West, which did have large price increases, are now posting persistent price declines.  

Month over month, prices were down 0.2% from June, which is unusual for this time of year, according to Hepp. 

“July’s decline in home prices is atypical — the last two periods where we saw monthly declines in July was in 2022 and during 2006-2008 period —  but this year’s decline follows a year of relatively flat home prices and persistent weakness in homebuying demand,” Hepp said. 

Looking ahead, Cotality expects the median price to rise 3.9% by July 2026. 

“While housing market expectations remain influenced by the availability of for-sale inventory and affordability concerns, the recent decline in mortgage rates may counteract the general price weakness observed this summer,” Hepp said. “Mortgage rates are currently at their lowest point since last September when a similar decrease stimulated increased demand for home purchases.”