avoid recession graph

Home Prices in 20 U.S. Cities Cool with the smallest gain since 2012.  At the same time mortgage rates have dropped off their highs by 20% to around 4% for a 30-year mortgage.  Why are lower mortgage rates not spurring more demand and helping home prices?  Why is appreciation falling so much?  What is this statistic actually telling us about the future?


What happened to house appreciation?

Case Schiller released their home price index for February which showed continued softness in appreciation. Home prices in 20 U.S. cities rose in February at the slowest pace since 2012, decelerating for an 11th straight month, as sellers continue to make properties more affordable to lure buyers.  The figures reflect how the housing market’s slump last year extended to the start of 2019. Despite steady wage gains and lower borrowing costs, buyers have still been holding out for more affordable properties.

Why is house appreciation slowing?

It is surprising that mortgage rates have dropped making housing more affordable (lower mortgage payments) and yet house prices have started to languish.  Inventory has picked up in many markets while demand has been tepid at best.  This slowdown in real estate is more than just seasonality, something fundamentally has changed in residential real estate causing buyers to be more cautious on a large purchase.  Below are two prospective drivers of the slowdown in appreciation

  1. Prices got ahead of themselves: Many markets have seen double digit appreciation for many years.  This clearly was not sustainable as wage growth could not keep up with the huge appreciation in values pricing many out of the market.  Wage gains continue to be tepid even as prices have moderated.  Many prospective buyers continue to wait on the sidelines for relief from the high prices.  Although lower mortgage rates have helped with affordability, I don’t see this trend reversing.
  2. Consumer confidence about the future: Consumers have been fickle about large purchases. The Michigan consumer confidence study declined slightly from March to April which shows consumers “hesitation” about the future.  Consumers are getting nervous as other large purchase items are also slowing like autos.  This lack of confidence is filtering through to the slowdown in housing.

I can’t recall a time period where interest rates were at historic lows, the stock market is at historic highs, and real estate was languishing.  With stocks and rates doing so well one would think real estate would follow right along, but this is not the case in today’s economy.  There is something more going on causing consumers to hesitate on home purchases.  Will this hesitation be fleeting, or will it persist?  If the current slowdown in housing continues, it will eventually cause consumers to pull back on other items causing a general slowdown in the economy.

At this point, the consumer is on the fence Will the consumer start buying more propelling the housing market or did they pull back further. Over the next several months we will get to see data which will show which side of the fence was chosen. 

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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.


Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all they need is their simple one page application (no upfront fees or other games).