A sign in front of a house for sale in San Francisco, California, July 14, 2022. The number of homes for sale in the US increased by 2% in June for the first time since 2019.
Justin Sullivan | Getty Images
Rising mortgage rates and broader economic inflation caused housing demand to plunge sharply in June, forcing house prices to fall.
Home prices are still higher than they were a year ago, but they were the fastest on record in June, according to Black Knight, a mortgage software, data and analytics company that began tracking the metric in the early 1970s. The rise has slowed. Year-on-year price appreciation fell 2 percentage points from 19.3% to 17.3%.
Price gains remain strong as supply and demand are not balanced. The housing market has suffered from severe shortages for years. Strong demand during the coronavirus pandemic exacerbated that.
Even when house prices crashed dramatically during the 2007-2009 recession, the largest one-month slowdown was 1.19 percentage points. Given the strength of the overall housing market, we don’t expect prices to fall across the country, but rising mortgage rates have certainly taken a toll.
According to Mortgage News Daily, the average interest rate for 30-year fixed mortgages topped 6% in June. It has since returned to the high 5% range.but that’s still significantly higher than the 3% range rate at the beginning of the year.
Ben Graboske, President of Black Knight Data & Analytics, said: “In fact, his 25% of the major markets in the US saw his June growth drop three points, and he had four countries where he slowed by more than four points that month alone.”
Still, this was the sharpest cooling on record nationwide, but Gravoske said the market would have to see another six months of this kind of slowdown for price growth to return to its long-term average. He calculates that it takes about five months for the full impact of interest rates to be reflected in house prices.
The markets with the steepest declines are those that used to have the highest prices in the country. Average home prices in San Jose, Calif. have fallen 5.1% over the past two months, the biggest drop of any major market. The price has been reduced by 75,000 yen.
In Seattle, prices have fallen 3.8% over the past two months, a $30,000 markdown. San Francisco, San Diego, and Denver round out the top five markets with the biggest price cuts.
The drop in prices coincides with a sharp increase in the supply of homes for sale, which has risen 22% over the past two months, according to Black Knight. However, inventories are still 54% below 2017-19 levels.
“With more than 700,000 listings in short supply nationwide, it will take more than a year for such record increases to fully normalize inventory levels,” Graboske said.
Price cuts don’t affect the average homeowner as much as they did then. Great recession, because today’s homeowners have significantly more assets. Tight underwriting and several years of strong price increases have pushed home his equity levels to record highs.
Nonetheless, the recent strong demand in the market could be a problem for some. About 10% of mortgaged properties were purchased last year, so the fall in prices has put some borrowers’ shares at risk. Your position can drop significantly.