Home Price Growth Stalls As Inventory Rebounds
Home price growth saw the largest single-month slowdown on record since at least the 1970s in June, coinciding with a huge increase in inventory, according to Black Knight’s most recent Mortgage Monitor Report.
Annual home price growth fell from 19.3% to 17.3% between May and June.
“For context, during the 2006 downturn the strongest single-month slowing was 1.19 percentage points – about what we saw last month – and June topped that by 66%,” said Black Knight Data & Analytics President Ben Graboske.
However, while the slowdown was historic, home price growth would need to fall at this pace for a while yet before annual price appreciation returned to 5%.
“Still, while this was the sharpest cooling on record nationally, we’d need six more months of this kind of deceleration for price growth to return to long-run averages. Given it takes about five months for interest rate impacts to be fully reflected in traditional home price indexes we’re likely not yet seeing the full effect of recent rate spikes, with the potential for even stronger slowing in coming months,” Graboske said.
The Fed raised interest rates by another .75% last week. The average mortgage rate dropped, however, as purchase demand fell in response.
At the local level, the slowdown was even more obvious, with 25% of major markets seeing prices lower by three percentage points. Four major markets saw a deceleration of four or more points just in June.
The slowdown coincided with the largest single-month gain in homes listed for sale in 12 years.
Black Knight’s data shows a 22% jump in the number of homes for sale over the last two months, but inventory is still down 54% from 2017-2019 levels. Inventory is short 716,000 listings across the country.
Metros are gaining inventory at differing rates, with some seeing inventory rise more quickly than the national rate. Those metros include San Jose, CA (-5.1%), Seattle (-3.8%), and San Francisco (-2.8%).
San Francisco was the first major market to return to pre-pandemic levels, with San Jose close on its heels.
“It’s therefore of little surprise to find both metros among the markets where prices are pulling back from recent highs, along with Seattle, San Diego, Denver, and others,” Graboske said.
Western metros that topped charts last year have taken a back seat to more affordable, cooler areas in the East. Realtor.com recently reported that for the first time in the history of its data, Western locations were completely gone from its June list of hottest real estate markets.
“When we look at the West Coast market, whether it’s Oregon, Washington, California, Arizona, or Nevada, their home prices have continued to rise even as mortgage rates jumped,” George Ratiu, manager of economic research for Realtor.com, said.
“Rising interest rates have pushed the cost of a monthly mortgage payment up about 60% above a year ago. And in, say, the [San Francisco] Bay Area, the effect is going to be magnified. If you buy a $900,000 home, all of a sudden you’re spending $1,600 more a month.”