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Home price appreciation slows to a pace not seen since 2006

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Home price appreciation slowed in May to a pace not seen since 2006 as inventory shortages eased in many of the country’s largest housing markets. But affordability remains a challenge for many homebuyers, and only a handful of cities have seen real price declines, according to data released Wednesday by Black Knight.

The Black Knight House Price Index showed that annual house price appreciation fell to 19.3 percent in May, down from 20.4 percent in April, and house price growth slowed. in 97 of the 100 largest real estate markets in the US, Miami, Omaha and Grand Rapids were the only exceptions.

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ben graboske

“The annual growth rate of home prices fell by more than a full percentage point in May, the largest monthly decline nationally since 2006,” Black Knight Data & Analytics president Ben Graboske said in a statement. “However, even with growth slowing in 97 of the top 100 US markets, overall home prices rose 1.5 percent from April, nearly double the historical average for the month of May.” .

Annual home price appreciation in the top 50 US markets

At the current rate of slowdown, it would take more than 12 months for annual home price appreciation to return to historical norms of 3 to 5 percent.

“That said, the pace of the slowdown could well pick up in the coming months, as we’ve already started to see in select markets like Austin, Boise and Phoenix,” Graboske said.

Markets that experienced the steepest house price slowdown in May included Austin (-12.2 percentage points), Boise (-12.1), Spokane (-7.1), Stockton (-6), Phoenix ( -5.1) and Seattle (-5). ).

Despite the slowdown, price growth remains strong for now, with nearly all major markets continuing to see bullish movement, Black Knight said.

Markets with the highest home price appreciation

  1. Tampa (34.6 percent)
  2. Raleigh (33.0 percent)
  3. Nashville (31.3 percent)
  4. Miami (30.8 percent)
  5. Jacksonville (29.8 percent)
  6. Orlando (29.7 percent)
  7. Phoenix (27.9 percent)
  8. Dallas (27.8 percent)
  9. Atlanta (27.1 percent)
  10. Las Vegas (27.1 percent)

Markets with the lowest home price appreciation

  1. Washington, D.C. (9.9 percent)
  2. Minneapolis (10.5 percent)
  3. Pittsburgh (10.9 percent)
  4. Baltimore (11.0 percent)
  5. Detroit (11.0 percent)
  6. Chicago (11.3 percent)
  7. New Orleans (11.9 percent)
  8. Saint Louis (12.5 percent)
  9. Milwaukee (13.0 percent)
  10. Louisville (13.0 percent)

Only a handful of markets have seen prices turn back from their peaks, and “reversals at this point have been marginal,” Black Knight analysts said in their monthly Mortgage Monitor report. “San Jose, California has seen the steepest pullback and even that has been modest, with the average price falling 0.5 percent in recent months.”

Affordability challenges

With 30-year fixed-rate mortgage rates hovering around 6 percent and home prices up 44 percent since the start of the pandemic, housing is less affordable than it has been since the middle of the decade. 1980, when mortgage rates doubled. digits

A homebuyer buying a median-priced home with a 20 percent down payment can now expect their monthly mortgage payment to top $2,100, nearly double the $1,089 required at the start of the pandemic.

As of mid-June 2022, Black Knight estimates that the average home mortgage payment consumes 36.2% of median household income, surpassing the post-1980s peak of 34.1% seen in July 2006. .

The pay-to-income ratio is even more extreme in markets like Los Angeles (73.3%), San Jose (67.8%), Las Vegas (54.7%) and Seattle (50.5%).

Home price appreciation is slowing in markets where affordability is particularly challenging, but also in markets where more listings are starting to appear online.

Falling sales drive up inventory

May saw the largest single-month inventory increase in more than five years, with active listings increasing by 107,000, nearly double the traditional seasonal increase for the month.

The increase in inventory will not necessarily translate into more sales, as “the improvements we are seeing are due to falling sales volumes rather than an increase in listings, which is not good for transaction revenue” Black Knight said.

The active listings deficit, the number of homes on the market in May 2022, compared to the 2017-19 average, decreased from -67 percent to -60 percent from April to May. But there were still about 769,000 fewer active listings on the market compared to historical norms, and all major markets are still facing inventory shortfalls.

Listing of shortfalls in the top 50 US markets.

Markets with the largest active listing deficits

  1. Hartford, Conn. (81 percent)
  2. Virginia Beach (73 percent)
  3. Raleigh (71 percent)
  4. Miami (70 percent)
  5. Providence (69 percent)
  6. Oklahoma City (68 percent)
  7. Richmond (67 percent)
  8. Baltimore (67 percent)
  9. Cincinnati (67 percent)
  10. Baltimore (67 percent)

Markets with the smallest active listing deficits

  1. San Francisco (6 percent)
  2. San Jose (7 percent)
  3. Seattle (27 percent)
  4. Las Vegas (29 percent)
  5. New York-Newark (35 percent)
  6. Sacramento (38 percent)
  7. Minneapolis (44 percent)
  8. Detroit (45 percent)
  9. Los Angeles (46 percent)
  10. Portland, Oregon (47 percent)

Markets like San Francisco, San Jose and Seattle are seeing the smallest listing shortfalls as affordability pressures and the ability to work remotely are driving homebuyers to look elsewhere, according to the report.

At the beginning of the year, San Francisco had an inventory shortfall of 32 percent, which has now dropped to 6 percent, while San Jose’s inventory shortfall has dropped from 50 percent to 7 percent. Seattle has also seen a dramatic improvement, starting the year with a 68 percent inventory shortfall that has dropped to 27 percent.

“Given how quickly West Coast deficits are disappearing, it will be worth watching those markets in the coming months to see how prices react to more balanced supply and demand,” the report said.

Email Matt Carter

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