Home Price Growth Falls To Lowest Level in a Decade

Black Knight’s Mortgage Monitor Report covering February 2023 overall found that home prices have risen for the first time in seven months as interest rates dipped, but still remain 18% below pre-pandemic levels due to affordability. 

In addition, inventory levels continued to deteriorate over the month falling for the fifth month to their lowest levels reported since May 2022. 

Seasonally-adjusted home prices rose 0.16%, the strongest gain reported in a year—at the same time home price growth fell below 2% for the first time in a decade. 

Black Knight also predicts that nationally, the annual growth rate is expected to fall below zero percent by April. More noteworthy, 39 of the 50 largest U.S. markets saw home prices rise on an adjusted basis in February; that’s in sharp contrast to this past November, when prices were falling in 48 of 50 markets 

“February’s national increase in home prices – up 0.16%, adjusted for seasonality – marked the first positive monthly growth we’ve seen in 8 months,” said Black Knight VP of Enterprise Research Andy Walden explains. “Daily transaction info from Black Knight Collateral Analytics and our Optimal Blue rate lock data show that the purchase market increased when rates declined in the early part of the month and borrowers were quick to take advantage of limited inventory. In many areas of the country, that dynamic – low inventory and a modest rise in demand – led to an uptick in home prices. All in, 39 of the 50 largest U.S. markets saw prices increase in February – in sharp contrast to just three months earlier, when 48 of those 50 were experiencing price declines. While some price increases – most notably in Miami, which saw the largest of the month – can be chalked up to people moving to the area, we’re seeing stronger price gains more generally in those areas with better affordability and larger inventory deficits. Still, the backward-looking national annual home price growth rate continued its descent, falling to 1.94% – the first time we’ve seen it under 2% since 2012. While that national number is still on track to fall below 0% in April, if inventory challenges and easing interest rates persist, they may well push it back into positive territory later this year. 

“The unfortunate reality is that the scarce supply of inventory that’s the source of so much market gridlock isn’t getting any better. In fact, seasonally adjusted inventory levels continued to deteriorate in February, marking not only the fifth straight month of such declines, but also the largest inventory deficit we’ve seen since May of last year, with more than 90% of markets seeing such deficits grow in February. New listings – already trending well below pre-pandemic levels for months – ran 27% below those levels in February as potential home sellers continued to shy away from the market. All in, total active for-sale inventory is back to 47% below pre-pandemic levels after having recovered to within 38% of normal levels late last year. Without a significant shift in interest rates, home prices or household income, this is a self-fulfilling dynamic that is quite likely to continue for some time.” 

This month’s report also surveys the equity landscape to find that February’s price gains have also helped to shore up what had been falling homeowner equity levels. At $14.6T, overall total equity for mortgage holders is now down $2.0T (-12%) from its 2022 peak. 

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