Chatter about tapering is getting louder now that our calendars have been flipped to September. But even though central bank measures haven’t yet been tightened, interest rates are already on their way up — the 30-year fixed is up from 3.55% six months ago to 4.54% today — and that’s taking a toll on housing.
According to Movoto Real Estate’s latest State of the Market report, the median price per square foot of American homes fell 1.1% from July to August, skidding from $181 to $179. That’s the first decrease of the year, while prices were flat from June to July.
While that trend could be a result of an increase in inventory — simple supply and demand — Movoto’s Randy Nelson did note that it also could be a result of increased interest rates.
Plus, this isn’t the first sign of trouble in housing. Last week, existing home sales fell more than 1% month-over-month, while that came on the heels of weak sales of newly built homes. Both data points were blamed on higher interest rates as well.
Of course, the median price per square foot is still 13% higher than a year ago and increased year-over-year in all cities but two. The largest increases were in Phoenix (+38.5%), Sacramento, Calif. (+30.8%), and Oakland, Calif. (+29.7%). Meanwhile, only New Orleans posted a drop, while Cleveland was flat.
Still, the monthly drop is a bit worrisome considering tapering hasn’t even begun yet, and the Fed has to pull the trigger sometime.
Alyssa Oursler is an Assistant Editor at InvestorPlace.