The red-hot housing market may be experiencing a slowdown in price growth.

Prices rose 19.8% year over year in August, which was the same as the previous month, according to the S&P CoreLogic Case-Shiller Indices. It is the first annual increase in prices since 2020.

From 19.2% in July, the 10-city composite annual growth was 18.6%. From 20% the month before, the composite 20 cities rose by 19.7%. The prices in all the cities included are at an all time high.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by a reaction to the Covid pandemic, as potential buyers move from urban apartments to suburban homes,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. The August data suggest that although the housing market is strong in general, it may begin to slow.

Year-over-year increases in Phoenix, San Diego, Tampa and other cities saw the greatest gains. The highest year-over-year increases among the 20 cities in August were recorded by Phoenix with 33.3%. San Diego followed with 26.2% and Tampa with 25.9%.

Eighteen out of twenty cities saw higher price rises in the August 2021 period than they did the same year last July 2021.

A drop in the average mortgage rate in July and August was partly responsible for price increases. In July, the average interest rate for the 30-year fixed mortgage fell to 3% and held there until September. Mortgage News Daily reports that it rose sharply to around 3.25 percent in September. In the next few months, higher interest rates may help to cool down home prices.

However, home prices are not likely to drop significantly as there is still high demand from both investors and homeowners. Even at the lowest end of the market there is still very little supply. Although some new inventory was available over the summer it continues to fall.

CoreLogic’s deputy chief economist Selma Shepp stated, “Persistently strong buyer demand from traditional homebuyers is amplified through an increase of demand among investors this Summer.” While strong appreciation rates for home prices are reducing the number of potential buyers, especially first-time buyers; the demand from higher-income households and the deepening supply-demand imbalance will push up the price of homes.