Home prices are now posting the biggest monthly declines since January 2009, according to the latest Mortgage Monitor report from Black Knight.
Median home prices in August fell 0.98%, only slightly better than July’s 1.05% monthly decline. The average home price is down 2% ($8,800) from its June peak nationally as we enter the historically slower fall-winter homebuying season.
The housing market has not seen such a significant two-month drop in prices since shortly after the collapse of Lehman Brothers in winter of 2008, Black Knight said on Monday.
Skyrocketing mortgage rates – now in the 7% range for some buyers – and limited inventory have driven mortgage affordability to its lowest levels since the early 1980s, a reversal from the frenetic boom in buying during 2020 and 2021.
With mortgage rates at 6.7% as of Sept. 29, it takes 38.2% of the median household income to make the monthly mortgage payment on the median-priced home bought with a 30-year mortgage and 20% down, Black Knight said. That monthly payment is up $930 from August 2021, a 73% increase.
“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,” added Ben Graboske, Black Knight’s president of Black Knight data & analytics.
Creating a path to success in today’s purchase market
Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?
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Home prices are beginning to fall from post-pandemic peaks but remain up 12.1% from Aug. 2021 due to the record growth seen in late 2021 and early 2022, Black Knight said in its report. Annual home price growth rates are poised to continue falling in coming months, though it’s unclear where the bottom is.
Much of that depends on how much inventory returns to the market. After seeing an uptick in listings from May through July, inventory levels stalled in August, growing at just 1/10th the rate of recent months. The market grew from just 1.7 months of for-sale inventory to 3.1 months before dropping down to three months in August.
“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,” said Graboske. “Some may be waiting out the market to see if demand – and prices – return in the spring.”
While 20% of markets have seen only marginal declines (less than 1%) so far, a third have experienced drops of 3% or more – including nine where prices have fallen more than 5%, Black Knight researchers found. The sharpest correction was in San Jose (-13%, or, about $203,000), followed by San Francisco (-10.8%, or roughly $137,000) and Seattle (-9.9%, or about $83,000), but other formerly scorching-hot markets have also cooled majorly since June. Las Vegas, Austin, Minneapolis, Washington, D.C., Raleigh and Nashville have all shed 3% of home value in recent months.
