Record drop in price growth

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It will be a few weeks before we get the next installment of home price indices (Case Shiller and FHFA), but today’s Black Knight Mortgage Monitor has an earlier look at the June results.

Much like the FHFA and Case Shiller, Black Knight’s data for May had shown year-over-year appreciation that still seemed reluctant to go too far below 20%. 19.3% was the official tally (Case Shiller was still above 20% and the FHFA had fallen to 18.3%).

Today’s release shows a much steeper deceleration in June, with the annual pace falling to 17.3%. While this is by far the biggest drop since record keeping began in the 1970s, there is at least one incredibly important caveat. Simply put, the price growth that led to these declines also set records. As such, any remote rapid return to normality will eventually produce huge declines.

Also, let’s not forget the fact that 17.3% is still an incredibly high rate of appreciation year over year. It didn’t even cross the 15% mark during the mid-2000s housing boom that contributed to the financial crisis.

Of course, that’s just the national average. The results vary considerably from one metropolitan area to another, with several already at more than 10% of their recent maximum annual growth rate.

The decline in prices speaks to broader affordability issues, both due to widespread post-pandemic appreciation and the steep push to higher mortgage rates in 2022. The net effect, unsurprisingly, is a noticeable change in inventory levels in some metropolitan areas. Some have returned to 2017-2019 levels while the national average is still down more than 50%.

Markets with both low accessibility and a relatively higher amount of inventory logically lose value the fastest (in the chart below, the down arrows indicate the fastest cooling).

The above are just a few of the charts available each month as part of Mortgage Monitor. The full report can be found here: https://www.blackknightinc.com/wp-content/uploads/2022/08/BKI_MM_June2022_Report.pdf

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