Amid high property prices and high interest rates, things are challenging for would-be home buyers. However, there are some encouraging signs that the market may continue to correct itself in the coming months.
According to the latest S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, month-over-month home prices continued to decelerate for the fifth consecutive month in November in all 20 cities. Year-over-year home prices increased by 7.7% in November, down from 9.2% the previous month.
Meanwhile, the Black Knight Home Price Index (HPI) reported its sixth straight monthly decline in December, with an annual home price growth rate slowing down to 5.0%, placing it only 0.4% above its 30-year average and marking its slowest home price growth rate since June 2020. According to Black Knight, an award-winning software, data and analytics company catering to the mortgage and real estate industries, we could see the annual home price growth rate turn negative within the next three months if the current pattern persists.
High Interest Rates Remain an Obstacle
Although the consistent deceleration in home prices may be good news for house hunters, high interest rates still hurt housing affordability. According to Black Knight President Ben Graboske, “Affordability still has a stranglehold on much of the market, with the monthly mortgage payment on the average-priced home more than 40% higher than it was this time last year.” Black Knight reports that it now takes nearly $600 more to make the monthly mortgage payment on the average-priced home with an 80% 30-year mortgage than it did a year earlier.
Despite coming down from their peak of 7% in November 2022, mortgage rates remain significantly higher than they were in previous years. As a result, would-be homebuyers and owners looking to refinance are more likely to lock in rates and possibly buy down points when mortgage rates decline even slightly. According to Black Knight, purchase rate locks soared by 64% during the first three weeks of January, the sharpest such rise in the past five years. In addition, 57% of borrowers locking in rates paid at least a half-point as part of a permanent buydown, 44% paid at least a full point, and nearly a quarter bought down their rates with 2 points or more.
We’ll keep you updated on further developments. In the meantime, if you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
