A combination of increased listings and weakening affordability continued to dampen home price appreciation in April – a trend that will likely to continue, according to First American.
“After years of historically low levels of homes for sale, the pace of existing-home listings has modestly increased, bringing much-needed supply to the housing market,” says Mark Fleming, chief economist for First American, in a statement. “However, just as inventory levels have increased, affordability has weakened as mortgage rates have drifted higher in response to the Fed’s decision to keep the federal funds rate ‘higher for longer,’ reducing demand.”
“More supply amid a pullback in demand means price appreciation is cooling,” Fleming says. “The month-over-month growth rate peaked in February at 1.3 percent, but has since cooled significantly. This supply-demand dynamic is likely to persist, so expect year-over-year price appreciation to follow this cooling trend in the months to come.”
Starter homes continue to see the strongest home price appreciation, as they have the strongest demand.
“Nationally, price appreciation for starter homes continues to outperform other price tiers,” Fleming says. “Given starter homes are the least supplied and the most demanded segment of the market, it’s no surprise that, even in a ‘higher-for-longer’ rate environment, there are markets with double-digit annualized price appreciation. Starter-tier prices are increasing year over year by more than 10 percent in St. Louis, Miami and Pittsburgh.”
Home prices nationally are now 53% higher compared to pre-pandemic levels (February 2020), according to First American.
Home prices increased 1% in April compared with March.
Photo: Julien Maculan