Inventory shortage is pushing home prices at record pace

With continued listing shortages, US real estate markets remained “blank hot” in April, with home prices rising at a record – and unsustainable – annual rate of 14.8%.

Black Knight’s latest Mortgage Monitor report recorded “the highest annual home price growth rate we’ve ever seen” in nearly 30 years, said Ben Graboske, president of data and analytics for the company, in a press release.

The western states recorded the largest price increases, with six metropolitan markets: Austin, Texas; Phoenix, Arizona; Seattle, Washington; Riverside, Sacramento and San Diego, California – with annual growth of 20% or more.

“Current levels of home price growth are not sustainable for an extended period, especially if mortgage rates start to rise,” Black Knight analysts concluded in the report.

Ben Graboske

If home values ​​continue to climb at the current rate and mortgage rates rise, it will push a key measure of affordability, the payment-to-income ratio, above the average of 23.6% over the past 25 years. years. Anything above the current ratio of 20.5% is seen as a “tipping point” where home price appreciation typically slows, Graboske said.

If the rates on 30-year fixed-rate loans were 3.5% by the end of 2022, the national payment-to-income ratio would reach 21.6% by the end of this year and 25% d ‘by 2022.

Low mortgage rates are fueling demand for housing, but Graboske said the most acute factor in the price increases is the shortage of available listings.

“The total number of active registrations is down 60% from the 2017 to 2019 average for April,” said Graboske. This means that there were almost 750,000 fewer homes on the market than typical. “It’s not improving either.”

Compared to seasonal levels before the pandemic, there were 26% fewer newly listed properties in April. With homes selling so quickly, newly listed properties now account for over 75% of listings, up from 27% a year ago.

The drop in the volume of new listings is likely to “create noticeable headwinds for the volumes of loans to purchase and sales of existing homes in the coming months,” according to the report.

At the metropolitan level, even the slowest growing markets experience “aggressive” price growth, the report notes. At 8.1%, Pittsburgh, Pa. Had the lowest rate of home price growth among the top 50 markets.

But it’s the highest “floor” Black Knight has ever seen – more than three times the previous record high of 2.4%.

The top 10 metropolitan markets with the strongest price appreciation were:

  • Austin, Texas (24.9%)
  • Phoenix, Arizona (24.4 percent)
  • Riverside, California (22.3%)
  • Seattle, Washington (20.8%)
  • Sacramento, California (20.8%)
  • San Diego, California (20.1%)
  • Salt Lake City, Utah (19.9%)
  • Providence, Rhode Island (18.1%)
  • Tampa, Florida (17.3%)
  • Jacksonville, Florida (17.0%)

Among the 50 largest housing markets, the 10 markets with the lowest price appreciation were:

  • Saint-Louis, Missouri (11.6%)
  • San Antonio, Texas (11.6%)
  • Orlando, Florida (11.0%)
  • New Orleans, Louisiana (10.9%)
  • Minneapolis, Minnesota (10.8%)
  • Birmingham, Alabama (10.8%)
  • Houston, Texas (10.3%)
  • Oklahoma City, Oklahoma (10.0%)
  • Chicago, Illinois (9.9%)
  • Pittsburgh, Pennsylvania (8.1%)

Many potential buyers have made headlines about rising home prices and a shortage of listings in many markets. More than half (56%) think it’s a bad time to buy, according to a recent poll by Fannie Mae. The survey also found that while potential buyers know it is difficult there, a record share of consumers (72%) said they would buy a home if they moved.

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