Home price growth slowed in 97 of the 100 largest housing markets in the US during May, according to Black Knight.

Home price appreciation tightened to 19.3% in May from 20.4% in April, the largest single-month pullback since 2006.

Despite home prices decelerating, home prices were still up +1.5% m/m, almost two-times historical average home price growth for the month of May, according to Black Knight.

Leading the way in this home price cooldown are the country’s less affordable markets that have relatively low supply deficits.  Think coastal areas of the country.

Level of Affordability Deterioration Now Comparable to Mid-1980’s

Black Knight indicated in its latest Mortgage Monitor report that today’s deteriorating housing affordability is impacted equally by rising rates and soaring home values  that have been spurred by historically low levels of inventory.

The average home price in the US is now equivalent to more than six times the country’s median household income, “the largest multiple on record since the early 1970’s,” according to Black Knight. Black Knight also reported that owners were putting out 36.2% of their average incomes  in order to make good on monthly mortgage payments for average-priced home in mid-June.

According to Black Knight, the Federal Reserve’s 0.75% interest rate hike in early June was the primary factor impacting affordability deterioration in homeownership. Black Knight indicated that today’s payment-to-income (P-t0-I) ratio stood at more than 50% in mid-June.

Since last week’s announcement that the US inflation had jumped to 9.1% during June, it’s a good bet the Fed will raise interest rates by another 0.75% at its upcoming meeting at the end of July. It’s a less sure bet, but a logical speculation, that the Fed may raise rates by a full 1.0%.

Inventory Levels Improvements

Black Knight Data & Analytics President Ben Graboske said, “The record-low listing inventory that had been driving these price gains nationwide has also begun to improve, albeit slightly.  Indeed, even with an increase in active listings of 107,000 in May – nearly double the traditional seasonal rise for the month – we are still -60% below the number of active listings we would normally see at this time of year.”

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