Buyers and Sellers can expect more Corrections to the Housing Market

According to recent data from Black Knight, Inc., an award-winning software, data, and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, price corrections are coming to housing markets across the United States.

Home prices in July slipped 0.77% from June, marking the largest single-month decline since January 2011, Black Knight said in its monthly mortgage monitor report. While July’s home price grew 14.5% year over year and the growth rate was more than triple the long run average, “such backward-looking metrics can be misleading as they can mask more current, pressing realities” in a volatile market, said Ben Graboske, data, and analytics president at Black Knight.

Prices through July were only off-peak levels by less than 1% nationally, more than 85% of major markets have seen prices come off their peak levels.

San Jose, California saw the most significant pullback, with the average home price now down 10% in recent months, followed by Seattle, Washington (-7.7%), cities in California including San Francisco (- 7.4%), San Diego (-5.6%), Los Angeles (-4.3%) and Denver, Colorado (-4.2%).

According to Black Knight, the impact of home price declines is twice as pronounced on tappable equity levels, which is defined as the amount a homeowner can borrow against while keeping a 20% equity stake.

After hitting a 10th consecutive quarter record of $11.5 trillion in the second quarter of 2022, Black Knight expects tappable equity to drop in the third quarter, marking the first decline in three years.

Overall, Black Knight believes the market is on strong footing to weather a correction. The total market leverage as of the second quarter – including both first and second liens – was just 42% of mortgaged homes’ values, the lowest on record.

A national home price decline of 5% would result in just 0.9% of homes becoming underwater, mostly impacting homeowners who bought their homes in 2022.

While it’s still considered a seller’s market, many of these corrections are benefitting buyers to some degree. If you’re considering becoming a homeowner soon, give Metrowest a shout and let’s discuss

your options!