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Record Drop in Price Growth - Mortgage Monitor

The next release of the Case Shiller and FHFA home price indices won't be released for a few weeks, but this week's Mortgage Monitor from Black Knight provides an earlier glimpse at June's data.

Black Knight's statistics for May showed year-over-year appreciation dipped below 20%, but barely. Much like FHFA and Case Shiller. The official figure was 19.3% (Case Shiller was still above 20%, and FHFA had dropped to 18.3%).

Today's data reveals a more apparent slowdown in June, with the annual pace dropping to 17.3%. Even though that is by far the most significant reduction since records have been kept, there is a concern. Price growth preceding these declines broke records. Given that we have had extraordinary price growth in the last few years, this could be the precursor to a significant decline. However, the ability to avoid a deep recession would likely reduce the amount in which property values decline.

Tide Turning In Favor Of Homebuyers As Seller Competition Increases

According to the most recent HouseCanary study, economic uncertainty has led to a further slowdown in housing market activity. The most recent Market Pulse report from HouseCanary, comparing data from July 2021 to July 2022, was issued today.

"In July, economic uncertainty and another steep interest rate hike from the Fed appeared to have impacted both seller and buyer behavior," said Jeremy Sicklick, co-founder and CEO of HouseCanary. "On one hand, elevated rates have contributed to a decrease in new net listing volume, with would-be sellers sitting on high amounts of equity and locked-in low mortgage rates. On the other hand, demand has also decreased, partly due to the sharp increase in interest rates, which had deterred potential buyers."

HouseCanary further reports that 3.25 million net new listings have been added to the market since July 2021, which is an 8.6% reduction over the previous year. Moreover, the monthly new listing volume was down 9% from July 2021. There were 323,484 net new listings added to the market in July 2022, a 17.8% decline from the same month last year.

Consumer Prices Rose 8.5% in July As Inflation Pressures Eases

Consumer prices increased by 8.5% in July over the same month last year, primarily because of lower fuel costs. Prices were unchanged monthly despite a 4.6% global drop in energy costs and a 7.7% drop in gasoline prices, and this has lessened the impact of monthly increases in food prices of 1.1% and housing expenses of 0.5%.

Inflation pressures persisted despite the numbers coming in lower than anticipated. With the increase in the food index, the annual growth rate reached 10.9%, the fastest pace since May 1979. Despite the energy index's monthly decline, electricity costs increased by 1.6% and were 15.2% higher than they were a year earlier.

After gas prices climbed beyond $5 per gallon, the July price decline has given consumers some cause for optimism. Despite an 11% drop in July, gasoline prices were still up 44% from a year earlier, and fuel oil prices were up 75.6%.

The Federal Reserve is executing a strategy of rate hikes and related monetary policy tightening to curb inflation rates that are significantly higher than their long-term aim of 2%. In 2022, the central bank has increased benchmark borrowing rates by 2.25 percentage points, and authorities have made clear signs that further rises are imminent.

A New York Fed study earlier this week revealed that consumers' future inflation expectations have decreased, which was some positive news. But for the time being, an issue is still the rising living expense.

Next week's potential market moving reports are:

  • Monday, August 15th – NAHB Home Builders' Index

  • Tuesday, August 16th – Building Permits, Housing Starts

  • Wednesday, August 17th – No Report

  • Thursday, August 18th – Initial Jobless Claims, Continuing Jobless Claims, Existing Home Sales

  • Friday, August 19th – No Report

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (480) 650-5412.

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