Median U.S. home prices fell on a month-over-month basis in August for a second consecutive month, according to real estate analytics company Black Knight. The declines in August and July mark the sharpest monthly contractions in home prices in 13 years.
Black Knight’s home price index found that home prices fell 0.98% in August, following a decline of 1.05% in July. The median home price is now 2% below the June peak, said Ben Graboske, the company’s data and analytics president, in a press release.
“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,” Graboske said. He noted that the only months with materially higher single-month price declines in recent years were in the winter of 2008, following the Lehman Brothers bankruptcy and subsequent financial crisis.
The largest price declines were concentrated on the West Coast, with San Jose seeing a drop of 13% (equating to a $203,000 decline for the median home) since June. It was followed by San Francisco (with a drop of 10.8%, or $137,000) and Seattle (down 9.9% for a loss of $82,500 in home value).
Other metro areas around the country have seen price contractions of 3% or more over the past couple of months, including Las Vegas, Austin, Raleigh and Nashville. Graboske expects the list of non-Western markets with month-over-month prices declines to continue expanding.
Still, home prices remain historically unaffordable after essentially a decade’s worth of appreciation that occurred in the past 2 ½ years, Graboske said. Home price appreciation, along with surging interest rates on a 30-year fixed rate loan, have pushed home affordability to its lowest point in 38 years.
With interest rates at 6.7% in late September, the median homebuyer would need to devote 38.2% of their household income to pay principal and interest on a mortgage, Black Knight reported. That’s the largest share on record since December 1984.
In recent months, the U.S. housing market has made some gains in inventory. Months of supply — or how long it would take for all homes on the market to sell at the current sales pace — rose from 1.7 months in May to 3.1 months in July. August inventory stalled as sellers appeared to step back from the market, Graboske said. He said this will be worth watching closely in the coming months.
“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,” Graboske said. “Some may be waiting out the market to see if demand — and prices — return in the spring.”
