The red-hot housing market appears to officially be a thing of the past.
A new report from mortgage technology and data provider Black Knight shows that median home prices fell 1.05% in July and 0.98% in August. That’s “two straight months of significant pullbacks after more than two years of record-breaking growth,” Black Knight Data & Analytics president Ben Graboske said in a news release.
The housing market hasn’t seen a two-month drop in prices this large since the 2008 financial crisis, the report says.
Some housing markets are seeing prices fall even faster, Black Knight’s report shows. San Jose, San Francisco and Seattle have seen the biggest declines from the market’s peak earlier this year, with drops of 13%, 10.8% and 9.9%, respectively.
But don’t forget: home prices are still significantly higher than they were at this time last year — even with this summer’s price drops. Data from real estate brokerage Redfin shows that median home prices were up nearly 7% in August compared to a year earlier.
Why are home prices falling?
Much of the slowdown in the housing market can be attributed to a rapid rise in mortgage rates, which recently hit 6.7% for a 30-year fixed-rate loan.
That’s more than double the average rate on the same loan at the beginning of this year. The result of that spike has been a huge decline in affordability for buyers.
Home price growth has slowed significantly as many buyers dropped out of the market and sellers were forced to cut prices to remain competitive — that is, if they still want to sell at all.
“Right now, prospective sellers are not only coming to grips with falling demand and declining prices due to sharply higher interest rates,” Graboske added, “but they also have a growing disincentive to give up their own historically low-rate mortgages in this environment.”