It seems like it was just yesterday that the shock and awe of home price appreciation had the housing market in a frenzy. Now that things are transitioning to what many may consider a more “balanced” market, the impressive surge in price tags has dwindled.
New data from software and analytics company Black Knight, Inc. shows recent declines that mark the “sharpest contractions seen in more than 13 years.”
In its latest Mortgage Monitor report, data from the Black Knight Home Price Index (HPI) indicated that median home prices fell 0.98% in August—marginally better than the 1.05% decline seen in July. Experts acknowledged that the reduction from July to August was the biggest single-month dip since January 2008.
The largest declines continue to be concentrated on the West Coast—California markets and Seattle—but cracks are beginning to form in other parts of the Sun Belt, including Phoenix, Austin, Raleigh and Nashville.
Despite the price pullback from historic peaks, housing is still “historically unaffordable.” That’s primarily driven by recent surges in 30-year mortgage rates, which experts said pushed home affordability to its worst point in nearly 40 years.
With rates at 6.7% as of Sept. 29, the report notes that 38.2% of the median household income is needed to make the principal and interest payment on the median-priced home purchase, the largest share since December 1984, when mortgage rates were at 13.2%.
The median home’s monthly principal and interest payment is up $930 from the same time last year—a 73% increase.
Prices are beginning to come off post-pandemic peaks, but remain up 12.1% from the same time last year due to the record growth seen in late 2021 and early 2022.
Key highlights
- Median home prices fell 0.98% in August—marginally better than July’s upwardly revised 1.05% monthly decline.
- July and August 2022 marked the largest single-month price declines seen since January 2009 and rank among the eighth largest on record.
- The average home price is down 2%—or about $8,800—from its June peak nationally.
- The monthly rate of home price decline rivals the pace seen during the Great Recession.
- For-sale inventory levels grew at 1/10th the rate of recent months in August.
- The national inventory deficit held relatively steady at -44%, with the market remaining more than 600K listings short compared to pre-pandemic levels.
- Experts state that annual home price growth rates will continue falling in the coming months.
The takeaway
“The Black Knight HPI for August marked the second consecutive month that prices pulled back at the national level, with the median home price now 2% off of its June peak,” said Black Knight Data & Analytics President Ben Graboske.
“Only marginally better than July’s revised 1.05% monthly decline, home prices were down an additional 0.98% in August. Either one of them would have been the largest single-month price decline since January 2009—together they represent two straight months of significant pullbacks after more than two years of record-breaking growth. The only months with materially higher single-month price declines than we’ve seen in July and August were in the winter of 2008, following the Lehman Brothers bankruptcy and subsequent financial crisis.
“Historically low inventory—along with record-low interest rates—was one of the key drivers behind U.S. home prices seeing essentially a decade’s worth of appreciation in just two-and-a-half years. Inventory levels had been improving though, with our Collateral Analytics data showing both overall inventory and months of supply rising sharply from May through July. We’d climbed from 1.7 months of for-sale inventory to 3.1 months before improvement stalled in August as sellers appeared to take a step back from the market. Inventory grew at just one-tenth the rate it had been, with the market still some 600K listings short of ‘normal,’ pre-pandemic levels. It will be worth watching inventory levels closely in coming months for any sign of a shift in seller sentiment. Right now, prospective sellers are not only coming to grips with falling demand and declining prices due to sharply higher interest rates, but they also have a growing disincentive to give up their own historically low-rate mortgages in this environment. Some may be waiting out the market to see if demand—and prices—return in the spring,” Graboske concluded.
