Home price appreciation slows to pace not seen since 2006

In a changing real estate market, Inman’s advice and expertise are never more valuable. From our events to our daily news coverage and hands-on journalism, we’re here to help you grow your business, adopt the right tools, and earn money. Join us in person in Las Vegas at Connect and use your Select subscription for all the information you need to make the right decisions. When the waters get choppy, trust Inman to help you navigate.

Home price appreciation slowed in May to rates not seen since 2006 as inventory shortages eased in many of the nation’s largest property markets. But affordability remains a challenge for many homebuyers, and only a few cities have seen an actual drop in prices, according to data released Wednesday by Black Knight.

The Black Knight home price index showed annual home price appreciation fell to 19.3% in May from 20.4% in April, with house price growth slowing in 97 of the 100 most major US real estate markets. Miami, Omaha and Grand Rapids were the only exceptions.

Ben Grabosk

“The annual house price growth rate fell more than one percentage point in May, the largest monthly decline nationally since 2006,” Black Knight Data & Analytics President Ben Graboske said in a statement. a statement. “However, even with slowing growth in 97 of the top 100 U.S. markets, overall home prices still rose 1.5% from April, nearly double the historical average for May. .”

Annual Home Price Appreciation in the Top 50 U.S. Markets

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

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

The markets that saw the sharpest deceleration in house prices in May were Austin (-12.2 percentage points), Boise (-12.1), Spokane (-7.1), Stockton (-6), Phoenix (-5.1) and Seattle (-5).

Despite the downturns, price growth remains strong at the moment and nearly all major markets continue to see upward movement, Black Knight said.

Markets with the highest house price appreciation

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

Markets with the lowest house price appreciation

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

Only a handful of markets have seen prices fall from their highs, and “pullbacks at this point have been marginal,” Black Knight analysts said in their monthly Mortgage Monitor report. “San Jose, Calif., saw the biggest pullback and even that was modest, with the average price dropping 0.5% in recent months.”

Affordability challenges

With rates on 30-year fixed-rate mortgages hovering around 6% and house prices up 44% since the start of the pandemic, homes are less affordable than they have been since the start of the pandemic. mid-1980s, when mortgage rates doubled. figures.

A buyer who buys a mid-priced home with a 20% down payment can now expect their monthly mortgage payment to exceed $2,100, nearly double the $1,089 required at the start of the pandemic.

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

The payout-to-revenue 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 difficult, but also in markets where more listings are starting to appear online.

Falling sales increase inventory

May saw the largest monthly increase in inventory in more than five years, with open listings rising by 107,000, nearly double the traditional seasonal increase for the month.

Increased inventory won’t necessarily translate to increased sales, as “the improvements we’re seeing are due to lower sales volumes rather than an increase in listings, which isn’t good for transactional revenue,” Black Knight said.

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

Listing deficits in the top 50 US markets

Markets with Largest Active Listings Shortages

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

Markets with the Smallest In-force Listings Deficits

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

Markets like San Francisco, San Jose and Seattle are seeing the smallest listing shortfalls as pressures on affordability and the ability to work remotely push buyers to look elsewhere, the report said.

At the start of the year, San Francisco had an inventory shortfall of 32%, which has now fallen to 6%, while San Jose’s inventory shortfall has fallen from 50% to 7%. Seattle also saw dramatic improvement, starting the year with a 68% inventory shortfall that fell to 27%.

“Given how quickly deficits are clearing up on the West Coast, these markets will be worth watching in the coming months to see how prices respond to more balanced supply and demand,” the report said.

Email Matt Carter

About Frances White

Check Also

The harsh reality of art collecting – and counterfeiting: “I never thought people could be so rude and skeptical”

Consider this: there are experts who say that half of the art sold at auction …