In front of a home for sale on July 14, 2022 in San Francisco, California. The number of homes for sale in the US increased 2% in June for the first time since 2019.
Justin Sullivan | beautiful pictures
Rising mortgage rates and inflation in the broader economy caused housing demand to plummet in June, forcing home prices to cool.
According to Black Knight, a mortgage analytics, data and software company that started tracking the index in the early 1970s, home prices are still higher than they were a year ago, but growth has slowed at a slower rate. The fastest rate was recorded in June. The annual rate of price increase decreased by two percentage points from 19.3% to 17.3%.
The price increase is still strong due to the imbalance between supply and demand. The housing market has been severely underfunded for many years. Strong demand during the coronavirus pandemic has exacerbated it.
Even as home prices plummeted during the 2007-09 recession, the steepest one-month drop was 1.19 percentage points. Prices are not expected to fall nationally, given the stronger overall housing market, but higher mortgage rates are certainly taking their toll.
The average 30-year fixed mortgage rate exceeded 6% in June, according to Mortgage News Daily. It has dropped back in the lower 5% rangebut this is still significantly higher than 3% at the beginning of this year.
Ben Graboske, president of Black Knight Data & Analytics, said: “The slowdown is widespread among the top 50 markets at metro level, with some regions even seeing a marked cooling off. than”. “In fact, 25% of the major US market saw growth slow to 3 percentage points in June, with 4 declines of 4 points or more in that month alone.”
However, while this is the sharpest cooling recorded nationally, the market will have to see another six months of such deceleration for price growth to return to its long-term averages, according to Graboske. He calculates that it takes about five months for the impact of interest rates to be fully reflected in home prices.
The markets that fell the most were those that had previously had the highest prices in the country. The median home value in San Jose, California, has fallen 5.1% over the past two months, the biggest drop by any leading market. That cut $75,000 off the price.
In Seattle, prices have fallen 3.8% over the past two months, or a $30,000 drop. San Francisco, San Diego and Denver are among the top 5 markets with the biggest discounts.
According to Black Knight, the cooling in prices has coincided with a sharp increase in the supply of homes for sale, up 22% in the past two months. However, inventories are still 54% below 2017-19 levels.
“With a nationwide shortage of more than 700,000 listings, it will take more than a year with such a record increase for inventory levels to fully normalize,” said Graboske.
The price drop won’t affect the average homeowner as much as they did for the time being Great Depression, because homeowners today have significantly more equity. Tight underwriting, and steep price increases over several years have sent home equity levels to record highs.
Even so, the recent strong demand in the market may be problematic for some. About 10% of mortgage properties were purchased in the last year, so the drop in prices could leave some borrowers with a much lower equity position.
