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The housing market keeps getting cooler.

Home prices fell for the third month in a row in September, according to the S&P CoreLogic Case-Shiller National Home Price Index. The index, which measures home prices across the United States, fell 1% between August and September (before seasonal adjustment).

It’s the latest evidence of a sharp turnaround in the housing market. After two years of extraordinary pandemic-fueled growth, prices are falling back to earth thanks in large part to sky-high mortgage rates.

“As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be more expensive and housing becomes less affordable,” Craig Lazzara, Managing Director at S&P Dow Jones Indices, said in a news release.

The average interest rate on a 30-year fixed rate mortgage has more than doubled this year, from about 3.2% at the beginning of January to nearly 6.6% today. The monthly mortgage payment on a typically priced home was $2,384 last week, according to data from the real estate brokerage Redfin. That’s 41% higher than the typical payment a year ago.

That huge spike in borrowing costs has pushed homes out of reach for many potential buyers.

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Home prices remain high in the grand scheme

All these forces are pushing prices lower, but it’s worth remembering that homes in the United States are still more than 10% more expensive than they were last year, according to the Case-Shiller index.

Even though demand from homebuyers has waned, there are significantly fewer houses for sale than there were before the pandemic.

“While buyers are stepping aside waiting for more affordable prices and rates – causing the slowdown on price growth – would-be sellers are ... holding tight to the inventory they currently own,” Zillow Senior Economist Nicole Bachaud said in email commentary shared with Money.

Bachaud added that as a result, home prices might not fall as much as some people expect them to in the coming months.

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