Home prices weakened month to month, according to Black Knight. While still gaining, which they usually do at this time of year, the gains fell below their 25-year average. This after significantly outdoing their historical averages from February through June. It’s a signal that a slowdown in prices may be underway again.
Behind the cooling off: mortgage rates. They rose sharply last summer and fall, causing prices to drop. They then came down for much of the winter and a bit of the spring, causing home prices to turn higher again. Now rates are back over 7% again, hitting 20-year-plus highs in August.
Add to that, new listings rose from July to August, atypical for that period of the year. Some sellers may be trying to cash in on these historically high prices. Active inventory, however, is about 48% below the levels seen from 2017 to 2019.
“While the uptick in new listings is good news for home shoppers, inventory remains persistently low, even with record-high mortgage rates putting a damper on demand,” said Danielle Hale, chief economist for Realtor.com.
The jump in home prices since 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, according to Black Knight. That makes homeownership the least affordable it’s been since 1984.
I doubt it. Had a friend try and get into a house last month. Things had cooled off. Was listed at 1.1 and they offered .8. Offer accepted, then they got cold feet and backed out. It just sold for .95. They feel like idiots.
Prices cooled for a bit. I think that's done. Its going to be very market specific, but in markets that are suffering any kinds of climate related loss of structures (California, Oregon, Washington, Florida, Hawaii), don't expect any significant reductions in home price. Now what happens in the insurance markets as a biproduct of new legislation and how that effects both rates and availability, that's whole separate ball game. But as far as the desirable areas of the country, I think that dip we saw was pretty much it. Expect no more rate hikes after then next 8-12 months. Wages will be gobbling up their portions of inflation as things smooth out from the preposterous amount of money injected into the system during covid. I would expect homes to be up 30-50% over the next 4-10 years. The only thing I think that could prevent that is a collapse of the insurance markets, which, does look possible in California.