Most of the nation's home prices are falling.
It is not likely that home prices will fall too steeply.
The recent rise in mortgage rates has made it more expensive to live in a home. Strong demand and tight supplies are supporting prices even though some buyers are pulling back.
Monthly comparisons are being used in recent reports because of the rapid decline in the housing market. Changes can look dramatic.
Black Knight reported a decline in prices for the second straight month in August. The decline in July was revised upward. Black Knight said these are the largest monthly declines in more than 13 years and the eighth largest since the early 1990's.
Ben Graboske, Black Knight's president of data and analytic, wrote in the report that one of them would have been the largest single-month price decline since January 2009.
In the winter of 2008, after the Lehman Brothers bankruptcy and subsequent financial crisis, the only months with higher single-month price declines were in July and August.
Real estate is heavily influenced by the local economy. It's also seasonal. Families buy larger, more expensive homes in the summer and spring to be able to move during the school year. Prices are skewed higher by that. Smaller, less expensive homes are more likely to sell in the fall and winter. Home prices are compared to get the most accurate reading.
The June peak of $438,000 has been knocked down by 2%. Black Knight says prices are off their peaks in 97 of the 100 largest U.S. markets.
The rate of growth is not growing as fast as it used to. Home prices were up 13.5% in August compared to the same month a year earlier, according to Core Logic. According to the report, that is the lowest annual rate of appreciation in more than a decade. Higher mortgage rates are partly to blame for cooling buyer demand. The annual increases will shrink but still show a gain in August of next year.
The median price of an existing home was up in August. Just last May, that gain was 15%. The median is often skewed by the type of home being sold. Sales of higher-priced homes fell in August after a surge in luxury home sales during the Pandemic. Some of the smaller annual gain could be attributed to that.
Home prices have fallen three times the normal pace this year, which is atypical for July to August.
The markets are changing more quickly than other markets. San Jose, San Francisco and Seattle are some of the markets that have seen the biggest declines. The markets are being hit hardest by rising mortgage rates because they were so expensive to start with.
Phoenix and Las Vegas saw the biggest increase in demand during the Pandemic. With the ability to work from anywhere, people went to the more affordable markets where the climate might have been friendlier. Prices went up as a result of that surge in demand.
Because of the shift in tech workers from Silicon Valley to the Sun Belt during the Pandemic, big price gains are holding up in Florida.
It is not likely that home prices will fall the way they did during the Great Recession because there is a lot of demand.
Supplies were low due to a decade of under building. Homebuying during the Pandemic only made the shortage worse. Home prices more than doubled in two years.
There are fewer people selling things. Some people don't want to get less for their home than they think they deserve, because the market is weak.
Prospective sellers are 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 historically low-rate mortgage in this environment. Graboske said that some may be waiting to see if the market returns in the spring.
Half of what is considered a balanced market is in the existing home market. There is more supply in the new home market, but new construction is more expensive and buyers are having to pay more. Even though prices have softened a bit, affordability is still one of the worst in history.
According to most experts, this is not a normal housing market or a normal correction in prices. Potential buyers are being weighed down by inflation, global economic uncertainty, rising mortgage rates and a tight supply of homes for sale. It's not clear how far they'll pull back and how much that will cool prices.
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