Home-price growth slowed at the fastest rate on record in June, according to the latest data from mortgage analytics company Black Knight, with the approximately 2% drop between May and June marking another historic about-face for a housing market that appears to be rapidly snapping back from recent highs.
“For context, during the 2006 downturn, the strongest single-month slowing was 1.19%,” said Black Knight Data & Analytics President Ben Graboske in a statement. “Given it takes about five months for interest-rate impacts to be fully reflected in traditional home price indexes, we’re likely not yet seeing the full effect of recent rate spikes.”
Specifically, year-over-year price appreciation slowed from 19.3% to 17.3% between May and June, according Black Knight. Even though prices would need to fall at this level for six more months to reach normal levels, the fact that the growth trajectory changed so dramatically is extremely unusual, according to Graboske.
With home sales, new permits and housing starts, and mortgage applications all consistently down in recent months, the slowing price growth is seemingly just another sign that an unsustainably hot housing market has begun its descent, with experts divided on just how bumpy the landing will be.
“While this was the sharpest cooling on record nationally, we’d need six more months of this kind of deceleration for price growth to return to long-run averages,” Graboske added.
The takeaway
Price growth—or lack of growth—remains unequal across regions, with Western metros seeing the fastest pullbacks. San Jose, California, experienced a 5.1% drop from April, with Seattle, Washington, down 3.8% in the same time period and Denver, Colorado, down 1.4%.
But some areas have maintained price growth or only lost a bit of momentum. Many of these more “resilient” metros are in the South, with nine of the top 10 cities for price growth located in Florida, Texas, North Carolina, Tennessee or Georgia.
Las Vegas, Nevada was the only metro outside of the south to make the top ten, coming in at nine.
Other concerning data points highlighted by Black Knight include significant increases in foreclosure starts and the delinquency rates of mortgages—up 26.60% and 3.31%, respectively. Both metrics remain well below pre-pandemic levels, however, and nowhere near heights reached during the 2008 crash.
90% of mortgage holders who entered forbearance during the pandemic are no longer in forbearance plans, meaning the danger of a pandemic-related spike in foreclosures appears to be minimal.
At the same time, rising mortgage rates and affordability issues have lowered down payments while increasing the debt-to-income ratio for many buyers. People with FHA and VA loans saw their debt-to-income ratio reach the highest level on record (44% and 42% respectively), while conforming loan holders are now roughly where they were in 2018 (36%).
Down payments fell only factionally, and remain well above pre-pandemic levels (57% higher than early 2020, currently an average of $80,500 for primary residences).
