Home prices fell for the first time in 3 years last month – and it was the biggest decline since 2011

An aerial view from a drone shows homes in a neighborhood on January 26, 2021 in Miramar, Florida. According to two separate indices existing home prices rose to the highest level in 6 years.

Home prices fell for the first time in three years in July according to Black Knight.

It is the biggest single-month decline in prices since January 2011. The 0.9% decline in July 2010 was the second-worst July performance of all time.

The housing market became less affordable due to the rapid rise in mortgage rates. The first years of the Covid pandemic saw home prices rise because of strong demand and historically weak supply.

In the last 30 years, housing affordability has dropped. According to Black Knight, a 20% down payment on a 30-year mortgage is required for the average home to be purchased. It is 13 percentage points more than it was when it entered the Pandemic and more than it was after the Great Recession. The average length of time is 25 years.

The vice president of enterprise research and strategy at Black Knight said that the dynamic between interest rates, housing inventory and home prices was no longer affordable.

July's data provided clear evidence of a significant inflection point in the market. As we move into what's typically more neutral seasonal months for the housing market, further price corrections are likely.

The market is heavily weighted towards families buying larger, more expensive homes so prices tend to rise between June and July. When school is out families like to move.

Home prices tend to rise from March through May due to the seasonal market. The prices fell in the months of July through February.

Local markets are seeing steep declines. Home prices in San Jose have fallen 10% in the last few months, followed by Seattle, San Francisco, San Diego and Los Angeles.

Home prices were 14.3% higher in July compared with July 2021, which is more than three times the historical annual price growth, but the majority of that growth took place over the first five months of 2022.

According to Mortgage News Daily, the average rate on the 30-year fixed mortgage is 3%. In May it pulled back slightly, but in June it shot up to over 6 percent. It is close to 5 percent.