Home price growth is slowing and inventory levels are increasing but home affordability is getting worse, according to the Black Knight May Mortgage Monitor Report…(Black Knight)
- Y-O-Y: Home prices were up 19.3% when compared to the same time last year which is down from the 20.4% gains reported in April. This is the largest single-month deceleration since 2006.
- M-O-M: Despite the yearly slowdown, prices were still up 1.5% month over month – nearly twice the historical average for May.
The good news for wannabe buyers is inventory levels are rising. May saw the largest single-month increase in inventory in more than five years, with
active listing volumes rising by 107K.
- Unfortunately, because inventory levels have been so depressed this big jump still puts the deficit of active listings at -60% which is better than the -67% reported last month, but there are still an estimated 769K fewer active listings than there should be in the market
Affordability is the real problem negatively impacting the housing market right now. As of mid-June 2022, it takes 36.2% of the median household income
to make the mortgage payment on the average priced home purchase. This is higher than mid-2000 peak of 34% and is the highest level since the mid-80’s.
- THE WORST: Affordability is at its worst in Los Angeles, where the average-priced home requires monthly P&I payments equal to 73% of the median household income
With rates expected to remain elevated and inventory levels expected to reach a more normalized level home prices should slow quickly if not correct slightly. Selma Hepp, Deputy Chief Economist for CoreLogic, on Tuesday said they “expect to see a rapid deceleration in the rate of growth over the coming year.” While this might be a shock to the housing market this is probably the best outcome for the housing market as the economy continues to cool.