Slowdown in home prices broke record in June: research firm

Annual home price growth dropped by nearly 2 percentage points in June, the largest single-month slowdown on record, according to new research.

Black Knight, a real estate software and analytics company that has been tracking the metric since the early 1970s, found that annual home price growth fell from 19.3 percent in May to 17.3 percent in June as the Federal Reserve continued hiking interest rates to cool off demand.

“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,” said Ben Graboske, the president of Black Knight’s data and analytics division.

“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, with the potential for even stronger slowing in coming months,” he added.

The Fed hiked rates by another 75 basis points last week, the second such increase in two months as the country faces inflation rates not seen in decades.

Existing home sales have fallen for five consecutive months as record prices and those higher interest rates drive more Americans out of the market. Black Knight’s analysis found that seasonally adjusted home sales were down by more than 21 percent since the start of the year.

Slowing sales have led to recent inventory increases, according to Black Knight, but nationally, the United States still faces a shortage of 716,000 home listings.

The company estimates it would take more than a year for inventory levels to fully normalize even with record increases.

“We’re also seeing significant shifts in the demand-supply equation, though that too has quite a way to go before normalization,” said Graboske.

Black Knight’s analysis found even more pronounced price slowdowns in some regions in June, which the company says were driven by large inventory increases, with some markets having returned to pre-pandemic inventory levels.

Twenty-five percent of major markets saw home price growth rates slow by 3 percentage points in June, according to Black Knight.

Average prices have fallen from recent peaks in 12 of the 50 largest markets. Prices in San Jose, Calif., fell by 5.1 percent, prices in Seattle fell by 3.8 percent and those in San Francisco fell by 2.8 percent.