July might have been the turning point for the US housing crisis

• Prices for US homes grew slower in July on a monthly basis, snapping a four-month streak of record inflation.
• The S&P CoreLogic Case-Shiller and the Federal Housing Finance Authority indexes both showed price growth cooling.
• Prices still rose at a record 19.7% on a yearly basis, underscoring how the market is far from normal.

July just might mark the beginning of the end of skyrocketing housing prices during the pandemic.

After four consecutive months of record-breaking price growth, the US housing market cooled off in July. The S&P CoreLogic Case-Shiller price index - a popular measure of nationwide home inflation - rose 1.6% through July, S&P Dow Jones Indices announced Tuesday. That's down from 1.8% growth in June and the slowest one-month gain since February. It also fell short of the median estimate of a 1.7% gain from economists surveyed by Bloomberg.

The government's own measure of US home prices flashed a similar signal. Prices rose 1.4% in July, the Federal Housing Finance Authority said Tuesday. That missed the median estimate of a 1.5% jump and reflected a slowdown from June's 1.7% gain. In other words, the intense price growth seen through much of 2021 is calming down, and doing so faster than experts anticipated.

On a year-over-year basis, home prices still rose at record pace. The S&P CoreLogic measure climbed 19.7% from July 2020, accelerating from the June reading of 18.7% growth. But the one-year climb is somewhat misleading. While the one-year gain is the largest since data collection began in 1987, the one-month increase shows the rally slowing into the fall.

To be sure, the market is far from normalized. The pace of home sales, while slower than last year's highs, picked up through the summer. And construction of new homes remains inadequate, according to estimates from the National Association of Realtors.

Home starts rose to an annualized pace of 1.6 million in August. That's well above levels seen before the COVID crisis, but NAR said in June that contractors need to build 2 million homes every year to fill the country's 6.8 million-home deficit.

"There is a strong desire for homeownership across this country, but the lack of supply is preventing too many Americans from achieving that dream," Lawrence Yun, chief economist at NAR, said in the June report.

The two prints likely bring some relief to prospective buyers falling behind in the hectic market. Home sales surged through the start of the pandemic as the shift to remote work and tumbling mortgage rates prompted a wave of pandemic moves.

But as home supply dwindled, demand for houses held strong. That disconnect fueled intense bidding wars and pushed prices higher at record pace. Many first-time buyers - particularly millennials - moved to the sidelines as the market frenzy continued.

Lawmakers are also looking to cool the market. Democrats are hard at work finalizing a $3.5 trillion spending package that includes $213 billion in funding for affordable housing. The Department of Housing and Urban Development estimates the funds could create more than 2 million new homes and fill a substantial hole in the nation's housing deficit.

The legislation, however, faces a difficult path to President Joe Biden's desk. Democrats are embroiled in the busiest legislative week in recent memory, and House Speaker Nancy Pelosi hinted on Sunday that the spending package will likely shrink to appease moderate members of the party.

A quick fix, then, isn't in the cards. But with price growth slowing, the sellers' market is starting to swing in buyers' favor.