Home prices drop for sixth-straight month in December to round out 2022

U.S. home prices logged a monthly decline in December for the sixth-straight month as the housing market rounded out a challenging 2022.

The S&P CoreLogic Case-Shiller U.S. National Home Price index fell 0.8% in December compared to the previous month, according to data released on Tuesday. On a yearly basis, the index climbed 5.8%, down from 7.6% in the previous month. On a seasonally-adjusted basis, prices fell 0.3% nationally in December.

All 20 cities reported lower price increases in the year ending December 2022 compared to the year ending in November 2022.

"The cooling in home prices that began in June 2022 continued through year end, as December marked the sixth consecutive month of declines for our National Composite Index," Craig Lazzara, managing director at S&P DJI, wrote in a press release.

"The prospect of stable, or higher, interest rates means that mortgage financing remains a headwind for home prices, while economic weakness, including the possibility of a recession, may also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken,” Lazzara added.

For the full-year, home prices rose 5.8% nationally, the 15th-best year in the index's 35 year history, S&P said. Still, this marked a slowdown from the 18.9% increase seen in 2021.

Regionally, the leading price gains over the prior year in December were in Miami, Tampa, and Atlanta, with year-over-year increases of 15.9%, 13.9%, and 10.4%, respectively.

On the other hand, the San Francisco and Seattle markets reported declines in prices over last year in December, with the West region overall seeing prices rise just 1.2% from the prior year.

SAN FRANCISCO, CA - FEBRUARY 18:  A for sale sign is posted in front of a home for sale on February 18, 2014 in San Francisco, California. According to a report by mortgage resource site HSH.com, an annual salary of $115,510 is needed to purchase a house in San Francisco where the median    home price is $682,410. The report included 25 of the nations largest metropolitan cities with Cleveland, Ohio being the cheapest with a needed salary of $19,435 to purchase a home.  (Photo by Justin Sullivan/Getty Images)
A for sale sign is posted in front of a home for sale on February 18, 2014 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

Still, home prices remain elevated. The median sales price for an existing home jumped 1.3% to $359,000 compared to a year ago, according to the data from the National Association of Realtors released February 21. And total inventory for housing in January climbed 2.1% from December levels.

Many are looking to the coming months for signs about how the housing market may play out for the rest of the year. Mortgage rates, meanwhile, have jumped in February, muddying the read on "how strong the nascent housing recovery is," wrote Deutsche Bank strategist Jim Reid in a morning note.

Housing market remains in flux

Out of the 25 largest metropolitan areas, four cities are grappling with an oversupply, which could lead to a gloomy forecast ahead, according to Goldman Sachs.

By the fourth quarter of 2024, the bank expects home prices to fall 19% in Austin, 16% in Phoenix, 15% in San Francisco, and 12% in Seattle.

Supply is outpacing demand in the Pacific and Southwest region due to "very poor levels of affordability, pandemic-related distortions, and in certain markets a high concentration of employment in the technology industry," Goldman noted.

Nationally, the housing outlook looks to be less dire. The bank expects home prices to fall 6.1% as mortgage rates head toward 6.5%. However, against this backdrop, there's a potential risk in oversupply of multi-family units.

Over the past six months, about 40% of total housing starts have been for multi-family units, according to Goldman. The firm noted, however, that most of these units take longer to build, which could challenge the medium- to long-term outlook for rental properties.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

Click here for the latest economic news and economic indicators to help you in your investing decisions

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app for Apple or Android

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube