Traders,

Mortgage rates can’t jump from 3% to nearly 7% in a one year and not have dire consequences for the housing market. According to the just released S&P CoreLogic Case-Shiller index, U.S. home prices cooled in July at the fastest rate in the history of the index.

The year-over-year gains in July were 15.8%, which might seem great in a vacuum. But it’s a big drop from the year-over-year gains in June which stood at 18.1%.

This from CNBC:

“July’s report reflects a forceful deceleration,” wrote Craig J. Lazzara, managing director at S&P DJI in a release, noting the difference in the annual gains in June and July. “The -2.3% difference between those two monthly rates of gain is the largest deceleration in the history of the index.”

CNBC

“For homeowners planning to list, today’s market is significantly different than the one from even 3 weeks ago,” said George Ratiu, senior economist & manager of economic research for Realtor.com

Home prices are dropping because affordability has weakened dramatically due to fast-rising mortgage rates. The average rate on the popular 30-year fixed mortgage started this year around 3%, but by June had briefly surpassed 6%. It remained in the high 5% range throughout July and is now edging toward 7%, making the average monthly payment about 70% higher than it was a year ago.

“As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day. Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate,” Lazzara said.

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