In an emerging cooling trend, U.S. home prices fell 0.3% between July and August following a 0.2% decline the prior month, according to the latest Home Price Insights report from Cotality.
Selma Hepp, chief economist at the real estate market analytics firm, observed in the report that “the housing market is in a slow rebalancing phase with home sales activity continuing to trend along multi-decade lows.”
Annual home price growth was 1.3% in August following July’s 1.4% mark.
“While high mortgage rates and low inventory remain key influences on market behavior, regional differences in supply and demand are causing markets to continue to diverge,” Hepp noted.
Markets that saw the largest annual price appreciation in August were concentrated in the Midwest and Mid-Atlantic regions. Those included Muskegon, Mich. (12.9% increase); Youngstown, Ohio (11.9%); Lima, Ohio (11.1%); Decatur, Ill. (9.7%), Erie, Pa. (9.5%); and Vineland, N.J. (9%).
Seven of August’s 10 largest annual price declines were concentrated in sunny Florida. Besides the Sunshine State, Hepp observed that Colorado, Hawaii, Arizona, Texas, California and Washington, D.C., all showed negative price appreciation in August. She pointed out that escrow costs have jumped in each of those areas due to higher property taxes and increased insurance costs.
“People are paying an average of 45% more in escrow costs compared with five years ago, and that is pushing up monthly payments and limiting the price of a home that people can actually afford,” Hepp wrote. “This additional layer of financial responsibility has in part led to homes spending longer on the market and deals being more difficult to close despite for-sale inventory growing. The result is downward price pressure.”
Since the beginning of 2020, property insurance costs have increased by an average of 70% compared to increases of 23% for principal, 27% for interest and 27% for property taxes, according to ICE Mortgage Technology. The company reported that average property insurance payments in July for single-family mortgage holders climbed to nearly 10% of the average monthly mortgage payment.
The summer homebuying season proved especially soft for home prices across the oversupplied Sun Belt and the West region, where inventory exceeded pre-pandemic levels and active sellers dwarfed the number of active buyers.
Despite the preponderance of for-sale inventory in some markets, a report from Realtor.com indicated that just 28% of listings in August were affordable to the typical U.S. household, assuming 30% of monthly income is being spent on a mortgage payment.
