Record-high home prices are back in many metros
A new Black Knight report reveals major gains in the Midwest and Northeast, signals an end to the U.S. housing correction.
Key points:
- 30 of the 50 largest markets analyzed by Black Knight saw home prices hit new highs in June.
- Hartford and Milwaukee were the biggest gainers, while Austin and Las Vegas were the biggest losers.
- Affordability will likely remain a problem for buyers, who overwhelmingly believe it's a bad time to buy.
Home prices are not only back up, but many major markets are again witnessing all-time highs.
That's the takeaway from the August mortgage monitor report from financial services and analysis firm Black Knight, whose Home Price Index (HPI) showed new record highs for 30 of the 50 largest markets analyzed in June.
The markets with the most dramatic year-over-year gains in June were largely in the Midwest and Northeast regions, a trend seen in recent pending home sales reports and the latest Case-Shiller update. Meanwhile, many of the overheated western and southern markets that had huge price gains during the pandemic have seen the biggest slumps in the last 12 months.
Northeast and Midwest are feeling the heat
According to the Black Knight report, the five markets with the highest annual price growth were Hartford, CT (+9.3%); Milwaukee, WI (+6.2%); Philadelphia, PA (+5.6%); Cincinnati, OH (5.5%); and Virginia Beach, VA (+5.4%).
The Midwest cities of Kansas City, St. Louis and Chicago also saw home prices improve at least 4% year-over-year.
The biggest drops were in previously booming markets including Austin, TX (-13.5%); Las Vegas, NV (-7.7%); Phoenix, AZ (-7.5%); Salt Lake City, UT (-5.3%); and San Francisco, CA (-5.3%).
The big gains across many markets in 2023 signal that the real estate correction that started last year may already be over, Black Knight researchers said in the report.
"At the national level, home prices have now fully erased their 2022 corrections hitting new all-time highs in June on both seasonally adjusted and non-seasonally adjusted bases," the report read, adding that recent home price gains "suggest that further acceleration of annual home price growth rates are likely on the horizon."
With high home prices and stubbornly high borrowing rates come equally high monthly mortgage payments. The report found that the typical monthly mortgage payment also hit a new record high in July at $2,308. And with over 90% of markets still seeing inventory deficits that have grown throughout the year, affordability may become even more elusive.
Consumers overwhelming say it's a bad time to buy
As home prices continue to climb and existing inventory remains tight, more consumers are saying that now is a really tough time to buy.
According to Fannie Mae's latest National Housing Survey, only 18% of respondents said it's currently a good time to buy, the lowest percentage since January. The other 82% say it's a bad time to buy.
The last time more than 50% of respondents said it was a good time to buy was in March 2021 when mortgage rates were near record lows, though elevated interest rates aren't the only factor contributing to the change in sentiment.
"Unsurprisingly, consumers continue to attribute the challenging conditions to high home prices and unfavorable mortgage rates," Fannie Mae SVP and Chief Economist Doug Duncan said in the report. "Further, the share of consumers expecting home prices to continue to rise has also been on a steady climb since March, which may only add to perceptions of unaffordability."