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The second half of 2022 has seen declining house prices. However, prices remain up year-on-year based on steady price gains in the first half of the year. The decline in pricing is, in part, driven by higher mortgage rates hitting affordability of housing. However, most markets have not seen year-on-year declines in house prices yet and regional trends mean the west coast is being hit harder than other markets.

Rising Mortgage Costs

A central issue is the spike in mortgage costs. 30-year mortgage costs touched 7% in early November, mortgage costs remain at levels we haven’t seen since 2007. This is driven by high inflation causing the Fed to raise interest rates sharply, which correspondingly increases mortgage costs.

Lower Housing Affordability

Higher mortgage costs have reduced housing affordability. That’s because for many people the house they can afford is determined not by the house price, but by the mortgage cost they can comfortably service from their paycheck.