The prices of single-family homes across the U.S. continued to decline in January, for the seventh month in a row, just as mortgage rates continued to cool across the country. 

Nationally seasonally adjusted monthly home prices declined 0.2%, according to the S&P Case Shiller data released on Tuesday, while the 20-city and 10-city prices fell 0.4% each. Prices rose in 15 of the 20 biggest cities in January. 

National home price gains grew 3.8% yearly – down from 5.6% yearly growth in December 2022. Miami, Tampa and Atlanta showed higher annual growth in the 20-city composite index, while San Francisco, San Diego and Seattle posted further declines, as reported earlier last month. The 20-city and 10-city composite home prices both grew by 2.5% annually, almost half from the previous month. 

“The market is still digesting the big backup and interest rates that we've seen over the last year,” said Douglas Porter, Chief Economist at BMO Financial Group. While home prices are on a decline, they’re still relatively higher than last year. Porter said he expected the housing market to further weaken as the year progresses. 

Home prices and sales have been falling because of higher interest rates. A cooling housing market shows that the Federal Reserve’s goal to control inflation is on track. With home prices falling, home buying activities surging and the most recent banking fiasco, it could be harder for the Federal Reserve to keep raising interest rates. 

To further explain the decline, homebuyers are still refusing to make offers on expensive homes at such high interest rates. To sell their properties, homeowners are forced to slash prices, effectively bringing down the overall housing prices in the region. Despite this, sellers are hesitant to purchase these properties as they would have to undertake high interest rates. This double-edged situation works in favor of the Federal Reserve’s fight against inflation. 

The recent collapse of banks around the country are also a sign of caution for borrowers and lenders as Federal regulators will look to tighten policies to prevent similar fiascos. 

Existing home sales jumped by 14.5% last month,coinciding with the start of spring home sales. Buyers with families often choose to purchase homes in the spring as it is the perfect time before the new school year begins. Pending home sales in January were up by 8.1%, which is based on the number of signed contracts for single-family homes, condos and co-ops.

When Yash Parikh put in an offer on a four-bedroom house in Everett, Washington, in March 2022, he knew he was taking a chance – prices in the area had surged in recent years, and the rate he was getting on his mortgage was much higher than would have gotten a few months earlier. But Parikh went ahead anyway, paying $760,000 for the house, with an interest rate of 3.62%.

“If I had a lot of cash, I would’ve waited,” Parikh said. “But I didn’t.”

Parikh was buying at what turned out to be the top of the market. Prices in the Seattle area have fallen 14% since the peak, and Redfin estimates that Parikh’s house is worth $43,000 less than he paid for it.

While this may be a trend in some parts of the U.S, cities like Atlanta, Miami and Tampa have realtors urging homeowners to sell their properties in their significantly booming housing markets. Residents in Forsyth County, Atlanta, have received flyers for the past few months. 

While this home price decline could mean good news for a lot of springtime homebuyers, a lot depends on the next two months’ home price data as it’ll show how the housing market was impacted by the recent interest hikes in February and March, along with the bank crises.