After rising steadily since January, home prices may now be turning lower again.
The most recent read on home prices shows they hit one other all-time high in July, rising 2.3% from the identical month last yr, based on Black Knight. That is a much bigger annual gain than the roughly 1% recorded in June, and August’s annual comparison will likely be even larger because prices began falling hard last August.
But prices weakened month to month, based on Black Knight. While still gaining, which they typically do presently of yr, the gains fell below their 25-year average. This after significantly outdoing their historical averages from February through June. It is a signal that a slowdown in prices could also be underway again.
“Along with monthly gains slowing below long-term averages, Black Knight rate lock and sales transaction data also points to lower average purchase prices and seasonally adjusted price per square foot amongst recent sales,” said Andy Walden, vice chairman of enterprise research at Black Knight. “All of those aspects combined underscore the necessity to concentrate on seasonally adjusted month-over-month movements fairly than simply counting on the standard annual home price growth rate.”
Behind the cooling off: mortgage rates. They rose sharply last summer and fall, causing prices to drop. They then got here down for much of the winter and a little bit of the spring, causing home prices to show higher again. Now rates are back over 7% again, hitting 20-year-plus highs in August.
Add to that, recent listings rose from July to August, atypical for that period of the yr. Some sellers could also be attempting to money in on these historically high prices. Lively inventory, nevertheless, is about 48% below the degrees seen from 2017 to 2019.
“While the uptick in recent listings is sweet news for home shoppers, inventory stays persistently low, even with record-high mortgage rates putting a damper on demand,” said Danielle Hale, chief economist for Realtor.com.
A drop in prices would come as some relief to buyers, but unlikely enough.
The jump in home prices because the start of the Covid pandemic, combined with much higher mortgage rates has crushed affordability.
It now takes roughly 38% of the median household income to make the monthly payment on the median-priced home purchase, based on Black Knight. That makes homeownership the least reasonably priced it has been since 1984.
