Home prices continued to tumble in August, dipping 0.98% nationally as another three-quarter interest rate hike by the Federal Reserve brought balance to supply and demand.
Home prices dropped 0.98% in August, down from the upwardly revised 1.05% monthly decline in July, according to Black Knight. The two consecutive monthly declines were the largest in more than 13 years and ranked among the eight largest on record.
“Either one of them would have been the largest single-month price decline since January 2009 – together, they represent two straight months of significant pullbacks after more than two years of record-breaking growth,” said Ben Graboske, president of Black Knight Data & Analytics. “The only months with materially higher single-month price declines than we’ve seen in July and August were in the winter of 2008, following the Lehman Brothers bankruptcy and subsequent financial crisis.”
The average home price was down 2% (-$8.8K) from its June peak but remains 12.1% higher than this time a year ago when the housing boom was still going strong. Despite price pullbacks, the housing market remains unaffordable for many.
With 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. That monthly payment was up by 73%, or $930, from last year.
“Historically low inventory – along with record low-interest rates – was one of the key drivers behind US home prices seeing essentially a decade’s worth of appreciation in just two-and-a-half years,” Graboske said.
“Housing market participants have reached an impasse, and surging mortgage rates are the culprit,” added CoreLogic deputy chief economist Selma Hepp. “Many buyers moved to the sidelines as the cost of homeownership became prohibitively high, while sellers were unwilling to give up locked-in record low rates and expectations of the peak sales price. As a result, home price growth continues to decelerate from April’s 20% peak and is anticipated to reach half of April’s rate by December. Home price deceleration and seasonal price decline in some markets will provide opportunities for potential buyers who are now facing lessened competition than earlier this year.”
“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,” Graboske said. “Some may be waiting out the market to see if demand – and prices – return in the spring.”
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