Home prices tumble in July, posting biggest decline since 2011
Housing prices fell 0.77% in July, dropping for the first time in 3 years
Housing is in a very steep decline: Larry McDonald
Economic experts Patrice Lee Onwuka and Larry McDonald react to consumers saying inflation is impacting their standard of living on 'Making Money.'
Home prices declined in July for the first time in nearly three years, posting the biggest decline in more than a decade, according to a new report from Black Knight.
Prices fell 0.77% from June to July – the largest single-month decline since January 2011.
For months, the housing market was buoyed by record-low interest rates at the same time that American homebuyers – flush with stimulus cash and eager for more space during the pandemic – started flocking to the suburbs.
But the interest rate-sensitive sector has started to cool considerably as the Federal Reserve moves to tighten its policy at the fastest pace in three decades in order to bring scorching-hot inflation under control.
HOME SALE CANCELLATIONS SURGE TO ANOTHER 2-YEAR HIGH AS BUYERS PULL BACK
A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022. (Photo by FREDERIC J. BROWN/AFP via Getty Images / Getty Images)
Policymakers already approved two consecutive 75-basis point rate increases in June and July and confirmed that another supersized hike is on the table in September.
Following the rate hikes, the average rate on a 30-year fixed mortgage – the most popular among new homeowners – climbed to nearly 6% in June, though they have since moderated. The average rate for a 30-year fixed rate mortgage hovered around 5.13% for the week ending Aug. 18, according to recent data from mortgage lender Freddie Mac.
That is significantly higher than just one year ago, when rates stood at 2.86%.
Combined with high home prices, the rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market.
President Biden delivers remarks before signing into law the Inflation Reduction Act of 2022 in the State Dining Room of the White House on Aug. 16, 2022. (Photo by Demetrius Freeman/The Washington Post via Getty Images / Getty Images)
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A new report from Redfin last week showed that home sale cancellations soared in July to another two-year high as buyers retreated from the market. About 63,000 home purchase agreements were called off in July, equal to 16% of homes that went into contract that month.
Experts expect to see further price fluctuations in the coming months as the Fed works to slow consumer demand, particularly in the housing market.
"We’ve been advising for quite some time that the dynamic between interest rates, housing inventory and home prices was untenable from an affordability perspective, and at some point, something would have to give," said Andy Walden, vice president of enterprise research and strategy at Black Knight. "We’re now seeing exactly that, with July’s data providing clear evidence of a significant inflection point in the market."