U.S. home prices fell for a second consecutive month in August, but with high mortgage rates and tight inventory, home buyers are expected to remain on the sidelines for now, according to Black Knight’s most recent Mortgage Monitor report.
The monthly rate of decline for home prices in July and August rivaled that seen during the Great Recession, the firm’s research shows. The question now is how far prices will fall.
“Only marginally better than July’s revised 1.05 percent monthly decline, home prices were down an additional 0.98 percent in August,” says Ben Graboske, president of Black Knight data and analytics division, in the report. “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.”
Meanwhile, sellers “appeared to take a step back from the market.” For-sale inventory levels stalled in August, growing at just 1/10th the rate of recent months.
“Historically low inventory – along with record low interest rates – was one of the key drivers behind U.S. home prices seeing essentially a decade’s worth of appreciation in two-and-a-half years,” Graboske says. “Inventory levels had been improving though, with our Collateral Analytics data showing both overall inventory and months of supply rising sharply from May through July.
“We’d climbed from 1.7 months of for-sale inventory to 3.1 months before improvement stalled in August as sellers appeared to take a step back from the market,” Graboske says. “Inventory grew at just one-tenth the rate it had been, with the market still some 600,000 listings short of ‘normal,’ pre-pandemic levels.
“It will be worth watching inventory levels closely in coming months for any sign of a shift in seller sentiment,“ he adds. “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.
“Some may be waiting out the market to see if demand – and prices – return in the spring.”
Photo: Kostiantyn Li
