According to a new report from Intercontinental Exchange, Inc (ICE) covering June 2024, data shows that annual home price gains continued to cool in April, marking the second month of pullbacks.
Gains of +6.1% year over year in February slowed to a revised +5.7% in March before easing to +5.1% as of April. As ICE’s VP of Enterprise Research Strategy Andy Walden explains, the cooling is apparent from both seasonally adjusted and unadjusted perspectives.
“With 30-year rates easing and affordability improving entering the year, unadjusted monthly price gains had been running above their same-month 25-year average since the start of 2024,” said Walden. “However, softening price growth in April has dropped us below that long-run average. We’ve seen the rate of appreciation slow on an adjusted level as well, with April’s +0.28% increase in home prices a marked downshift from +0.45% in March. That’s equivalent to a +3.4% seasonally adjusted annual rate, suggesting annual growth will likely continue to slow in coming months.”
As noted in the Mortgage Monitor report, if adjusted monthly gains were to continue at their current pace of +0.28% per month, the annual growth rate metric would fall below 4.25% in June, with home prices seeing year-over-year gains of less than 4% by July. However, as Walden pointed out, both supply and demand remain constrained in the housing market, and interest rate movements in either direction can change prices.
“While we’ve made meaningful strides in terms of inventory improvement, there are still roughly 36% fewer listings than normal for this time of year. Likewise, in the face of higher rates as well as prices, purchase mortgage demand is still about 45% off comparable periods in 2018 and 2019. As we’ve seen in recent years, any large move in rates can result in those supply/demand dynamics shifting quickly, either bolstering or softening home prices.”
The report details broad improvement in the number of homes for sale nationwide, with inventory up 30% year over year in April to its highest seasonally adjusted level since mid-2020. Nearly 90% of U.S. markets have stronger inventory levels than at this time last year, with inventory in 14 of the largest markets having returned to pre-pandemic levels. Of those, 13 are in Florida and Texas. Improvement has been more limited – with inventory deficits even worsening in some cases – in many northeastern and midwestern markets, putting continued upward pressure on home prices in these areas.
“Inventory seems to be the primary differentiator when it comes to the bifurcation we’re seeing in housing market temperatures across the country,” Walden added. “Generally speaking, the Northeast and Midwest still face deep deficits in available homes for sale, helping prices continue to run hot. On the other end of the spectrum, prices are softening in Florida and Texas as for-sale inventories rise in both states. Then you’ve got California, where affordability and inventory are in a steel cage match to determine dominance. In April, each of the state’s top 10 markets either registered below-average growth or clocked adjusted price declines.”
Other notable data from the report:
- The number of homes for sale has been gradually improving on softer purchase demand in this spring’s higher interest rate environment, as inventory hit its highest seasonally adjusted level since mid-2020
- Nearly 90% of U.S. metropolitan areas now have more homes for sale than at this same point last year, with inventory in 14 of the top 100 markets having returned to pre-pandemic, 2017-2019 levels
- The ICE Home Price Index (HPI) for April showed cooling annual growth for the second consecutive month, falling to +5.1% from a revised 5.7% in March and +6.1% in February
- Similarly, unadjusted monthly gains (+0.88%) in April dipped below the 25-year same-month average for the first time this year
- Adjusted for seasonality, home prices rose +0.28% in April (down from March’s +0.45%), equivalent to a seasonally adjusted annualized rate (SAAR) of +3.4%
- Should adjusted gains hold at this pace, by June the backward-looking annual growth rate would fall below +4.25% and be less than +4% by July
- However, with both supply (-36%) and demand (-45%) still sitting well below pre-pandemic levels, meaningful 30-year interest rate movements could shift the market relatively quickly in either direction
Click here to read the report in its entirety.
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