Home prices weakened month to month, according to Black Knight. While still gaining, which they usually do at this time of year, the gains fell below their 25-year average. This after significantly outdoing their historical averages from February through June. It’s a signal that a slowdown in prices may be underway again.
Behind the cooling off: mortgage rates. They rose sharply last summer and fall, causing prices to drop. They then came down for much of the winter and a bit of the spring, causing home prices to turn higher again. Now rates are back over 7% again, hitting 20-year-plus highs in August.
Add to that, new listings rose from July to August, atypical for that period of the year. Some sellers may be trying to cash in on these historically high prices. Active inventory, however, is about 48% below the levels seen from 2017 to 2019.
“While the uptick in new listings is good news for home shoppers, inventory remains persistently low, even with record-high mortgage rates putting a damper on demand,” said Danielle Hale, chief economist for Realtor.com.
The jump in home prices since the start of the Covid pandemic, combined with much higher mortgage rates has crushed affordability.
It now takes roughly 38% of the median household income to make the monthly payment on the median-priced home purchase, according to Black Knight. That makes homeownership the least affordable it’s been since 1984.
Why would anybody ever sell their house if they have a pandemic mortgage rate of 3%? Because now rates are like 7%, you’d be losing so much money. Only way you should sell is if you’re paid off, and are buying in cash. But in that case, it wouldn’t really affect the market.
Yup, we’re not moving for largely that reason. We have a good rate in a good area, and while we’d prefer to move somewhere else, I’m not paying these interest rates.
If prices were coming down commensurate with rates increasing you could make a lateral change and buy the same amount of house for the same amount of money, but raising rates has only slightly reduced the rate house prices are increasing, rather than bring them down. It’s insane. Every month is the new worst time in modern US history to buy a house. It sucks for property owners too because taxes based on fair market value are rising crazy fast as well.