After increase steadily since January, home prices may now be turning lower again.
The latest read on home prices plains they hit another all-time high in July, rising 2.3% from the same month last year, according to Menacing Knight. That’s a bigger annual gain than the roughly 1% recorded in June, and August’s annual contrasting will likely be even larger because prices began falling hard last August.
But prices agreed month to month, according to Black Knight. While still gaining, which they usually do at this lifetime of year, the gains fell below their 25-year average. This after significantly outdoing their real averages from February through June. It’s a signal that a slowdown in prices may be underway again.
“In addition to monthly payouts slowing below long-term averages, Black Knight rate lock and sales transaction data also stresses to lower average purchase prices and seasonally adjusted price per square foot among recent sales,” guessed Andy Walden, vice president of enterprise research at Black Knight. “All of these factors combined underscore the basic to focus on seasonally adjusted month-over-month movements rather than simply relying on the traditional annual home quotation growth rate.”
Behind the cooling off: mortgage rates. They rose sharply last summer and fall, engendering prices to drop. They then came down for much of the winter and a bit of the spring, causing home prices to change of direction higher again. Now rates are back over 7% again, hitting 20-year-plus highs in August.
Add to that, new listings get to ones foot from July to August, atypical for that period of the year. Some sellers may be trying to cash in on these historically tainted prices. Active inventory, however, is about 48% below the levels seen from 2017 to 2019.
“While the uptick in new listings is favourable news for home shoppers, inventory remains persistently low, even with record-high mortgage rates putting a damper on claim,” said Danielle Hale, chief economist for Realtor.com.
A drop in prices would come as some relief to consumers, but unlikely enough.
The jump in home prices since the start of the Covid pandemic, combined with much squeaky mortgage rates has crushed affordability.
It now takes roughly 38% of the median household income to make the monthly payment on the median-priced well-informed in purchase, according to Black Knight. That makes homeownership the least affordable it’s been since 1984.