Growth in U.S. house prices slowed dramatically in July, rising 15.8% year over year, still significantly beyond their year-ago levels but weaker than June's 18.1% gain, based on the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. The negative 2.3-percentage-point gap between the latest two months' growth rates was dubbed the "largest deceleration in the history of the index."

S&P Dow Jones Indices Managing Director Craig Lazzara described the July house price report as a reflection of "forceful deceleration," noting that mortgage financing has become more expensive due to continued interest rate hikes by the Federal Reserve. "Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate," Lazzara said.

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Slower price growth in top cities

The house price deceleration was observed across all 20 cities. The 20-City Composite Index gained 16.1% year-over-year in July, a slowdown from the previous month's 18.7%, while the 10-City Composite Index increased 14.9% year over year, down from 17.4% in June.

For the fifth consecutive month, Tampa, Fla., had the highest annual home price gain at 31.8%. Miami came in at a close second, with an annual price hike of 31.7%, followed by Dallas at 24.7%.

Top homebuilder, residential mortgage lender

Overall U.S. homebuilder stocks were still down, closing Sept. 26 with a median total return of negative 31.7% over the course of one year.

Legacy Housing Corp. led the U.S. homebuilder stocks on Sept. 26, with a one-year total return of negative 3.6%. In the 12 months to June 30, the company sold 3,197 homes, a 3.8% increase from the previous year.

Rocket Mortgage LLC still leads the list of U.S. residential mortgage lenders year-to-date, originating $80.96 billion in residential mortgages through June. This was down 53.3% from the same period in the previous year.

New home sales surged; existing home sales still down

New single-family home sales in the U.S. surged 28.8% on a monthly basis in August to a seasonally adjusted annual rate of 685,000 units, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. On an annual basis, new home sales slightly fell 0.1%.

During the same period, privately owned, single-unit housing starts increased 3.4% from the prior month but dropped 14.6% on a yearly basis.

On the other hand, existing-home sales fell for the seventh consecutive month, slightly declining 0.4% month over month in August, according to the National Association of Realtors. When compared to the previous year, existing-home sales slipped 19.9%.

In a Sept. 21 press release, National Association of Realtors Chief Economist Lawrence Yun noted that the housing sector immediately felt the brunt of the Fed's interest rate policy changes. "The softness in home sales reflects this year's escalating mortgage rates. Nonetheless, homeowners are doing well with near nonexistent distressed property sales and home prices still higher than a year ago," Yun said.

Yun predicts inventory will remain tight in the next few months and even for the next couple of years, noting that the reluctance of some homeowners to trade up or down after locking in historically low mortgage rates is likely to raise the demand for additional new-home construction to boost supply.

S&P Dow Jones Indices and S&P Global Market Intelligence are owned by S&P Global Inc.