US home prices are falling at their fastest since the Great Recession

Home prices in the US are falling to their sharpest peak since the housing market collapsed during the Great Recession, mortgage research firm Black Knight said in a report published Monday.

According to Black Knight’s August Mortgage Monitor report, median home prices fell 0.98% from July to August. Revised data showed an even sharper 1.05% drop from June to July.

“Together, they represent two consecutive months of significant setbacks after more than two years of record-breaking growth,” said Ben Graboske, President of Black Knight Data & Analytics.

“The only months with significantly higher single-month price declines than in July and August were the winter of 2008 after the bankruptcy of Lehman Brothers and the subsequent financial crisis,” added Graboske.

The price declines are the sharpest since January 2009, Black Knight said, citing data from mortgage, real estate and public records. Average home prices are down 2% from their peak in June.

House for sale
Mortgage rates have skyrocketed as the Fed hikes interest rates.
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The US housing market has been red hot during the COVID-19 pandemic as low inventories and cheap interest rates led to record buying. But demand has cooled significantly as mortgage rates soar as the Federal Reserve hikes rates to tame inflation.

The average 30-year fixed-rate mortgage was 6.7% last week, more than double January’s rate.

Despite the recent declines, prices were still 12.1% higher in August than a year earlier, according to the report.

The sharp rises in mortgage rates, coupled with home prices that are still much higher than normal, have created an affordability crisis for potential buyers.

Based on median household income, buyers are putting 38.2% of their monthly income towards mortgage payments assuming a mid-price home with a 30-year mortgage and a 20% down payment.

That costly figure justifies the current US housing market as the least affordable since 1984, according to Black Knight. This has marginalized many prospective buyers.

In many cases, sellers respond to the fall in demand by lowering list prices.

“Right now, not only are potential sellers having to contend with falling demand and falling prices due to soaring interest rates, but they also face a growing disincentive to abandon their own historically low mortgages in this environment,” Graboske said.

Graboske noted that many sellers are likely waiting out the market, hoping conditions will improve by spring. US home prices are falling at their fastest since the Great Recession


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