Home Prices Rose Near Record High In Q2
Annual single-family home prices rose by 19.4% in Q2 2022. This is down from Q1’s upwardly revised 20.5% but still close to a record high, according to Fannie Mae’s latest Home Price Index.
On a quarterly basis, home prices increased by 4.3% between Q1 and Q2.
“Home prices maintained a near-historic pace of appreciation in the second quarter, as low levels of housing inventory continued to support price growth,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
“At the end of 2021 and extending into 2022, we believe many homebuyers pulled forward their purchase plans to avoid expected increases in mortgage rates, contributing to demand for homes and strong price appreciation. Given the sharp rise in mortgage rates since that time, and the resulting negative impact on affordability to potential homebuyers, we expect purchase demand to cool in the quarters ahead, and for home price appreciation to moderate as a result.”
Builders are scrambling to restock the housing market, which has suffered from persistent underbuilding. Between January 2012 and June 2021, 12.3 million households were formed but only 7 million new single-family homes were built.
That lack of homes came to a head in the last two years as the pandemic inspired Americans to move and Millennials entered prime homebuying age, forcing prices to skyrocket.
A recent HouseCanary report found that net new home listings are down 4.3% YOY, the largest decrease since June 2020.
The prevailing theory is that as more houses come on the market, prices will moderate. But as mortgage interest rates shoot up, inventory may play a lesser role. The market is already showing signs of cooling even as the inventory shortage rages on.