Home price growth saw its largest single-month slowdown since 2006 in May as inventory begins to correct, according to Black Knight’s May Mortgage Monitor Report.
May was the second straight month of prices cooling across the country. Home price growth slowed in 97 of the U.S.’s 100 largest housing markets. The national appreciation rate fell by more than a whole point YOY.
“[W]hile any talk of home values and 2006 might set off alarm bells for some, the truth is that price gains would need to see deceleration at this rate for more than 12 months just to get us back to a ‘normal’ 3-5% annual growth rate,” said Black Knight Data & Analytics President Ben Graboske.
“That said, the pace of deceleration could very well increase in the coming months, as we’ve already begun to see in select markets such as Austin, Boise, and Phoenix.”
But prices remained elevated, up 1.5% from the month prior and well over the historical average for the month of May.
Affordability remains a top concern, as it is now at its worst point since the mid-1980s thanks to increasing mortgage rates and off-the-charts home price appreciation. The average home costs six times the median household income, the largest on record since the 1970s.
The markets with the fastest-cooling prices tended to have low affordability and low inventory deficits, Black Knight said. Those markets can correct faster because it takes fewer additional homes to fill the gap.
But most markets are still struggling to get inventory up to past levels. Graboske noted that even with a 107,000 home boost in May, there are still 60% fewer active listings than historically would be available at this time of year.
“All major markets are still facing inventory deficits, but some have seen their shortages shrink much faster than others,” he said.
“Unsurprisingly, these are also among the markets seeing the strongest levels of cooling so far this year, with annual home price growth rates in each down more than three percentage points in recent months.”