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Home price appreciation is slowing fast across the country under the weight of higher mortgage rates, with typical property values even falling month-over-month in about a fifth of major metro areas in July. Clearly, the slowdown is necessary if Federal Reserve policy makers are going to cool inflation and restore affordability to the housing market. The challenge is to prevent the deceleration from becoming a collapse, but monetary policy makers have a chance to pull it off, provided unpredictable outside forces cooperate.

 
 

Nationally, typical home values rose a seasonally adjusted 0.7% last month from June, according to the Zillow Home Value Index data released Friday. That’s consistent with 8.5% home value appreciation on an annualized basis, a considerable downshift from a pace of around 25% in mid-2021. The Fed is coming in hard and fast on the 5% pace that was common in the five years before the pandemic, which would finally be consistent with its goal of bringing inflation back under control.

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