Home prices hit new highs, driven by tighter supply

According to the Black Knight Home Price Index, home prices hit a record high in May, rising 0.7% nationally on a seasonally adjusted basis from April.

Prices have been rising since January and were up 0.1 percent in May from a year earlier.

A sharp rise in mortgage rates last year poured cold water on an overheated housing market, but it didn’t last long. Home prices are now rising again, and the gains are accelerating every month, even though interest rates remain high.

“There’s no doubt that the housing market has been reignited from a housing price perspective,” said Andy Walden, vice president of corporate research at Black Knight.

“Although the backward-looking annual growth rate fell to 0.1%, May’s exceptionally strong month-on-month growth of +0.7% would equate to an annualized growth rate of 8.9%, suggesting that annual house price growth will remain at or near 0% for only sustained A short period of time, and then a sharp upward trend over the next few months,” Walden added.

Prices began to fall last summer after the average rate on a 30-year fixed-rate mortgage more than doubled in just six months. Prices continued to fall until January, with buyer demand recovering but supply very tight. Buyers may just be used to higher rates.

“Earlier this year, I stated that I believed 6% mortgage rates were accepted as the new normal. I think we’re in an environment now where 7% mortgage rates are the new normal and people are embracing it,” Robert ·Reffkin (Robert Reffkin) said. Compass Real Estate CEO said last week on CNBC’s “Squawk on the Street.”

By May, more than half of the nation’s 50 largest housing markets, mostly in the Midwest and Northeast, had either returned to previous price peaks or hit new highs.

Home prices remain weak across the West and in many cities seen as pandemic “boom towns,” which saw an influx of remote workers looking for new homes in the early days of the pandemic.

But those prices are starting to firm up. Home values ​​in San Jose, Calif., fell 10% last year, but inventory has started to decline again, and prices there are now picking up. It rose 1.4% in May, the second-biggest monthly gain among all markets on a seasonally adjusted basis. San Diego, Los Angeles, San Francisco and Seattle also saw price increases in May.

The one exception is Austin, Texas, one of the biggest pandemic boom towns.

“Inventories there continue to be higher than pre-pandemic levels, putting downward pressure on prices, which have fallen to -13.8% below their peak, the widest gap of any market. Currently, only 8 of the top 50 markets The market is more than 5% below its actual level. It will peak in 2022,” Walden said.

But overall, supply is down again. New listings are down about 25% from a year ago, as homeowners with mortgage rates below 4% are reluctant to sell their homes and may pay a higher rate for another home. Total inventory is now about half what it was before the pandemic, which sparked a massive housing boom.

Existing home sales are still much weaker than they were a year ago, but that has less to do with rising costs and more to do with reduced supply. The median price of an existing home in May was $396,100, according to the National Association of Realtors. Real estate brokerage Redfin reported last week that the average home is now selling for just above the list price for the first time in nearly a year.

Even with affordability taking a hit, bidding wars are apparently back. With a 30-year interest rate of 6.67% as of June 22, it would take $2,258 a month in principal and interest to cover a median-priced home with a 20% down payment on a 30-year mortgage, according to Black Knight. It was the largest such payment on record and slightly higher than the $2,234 requested in October.