Home prices and sales have declined as the demand from all buyers, including investors and buyers interested in building homes, has cooled, according to a report from CoreLogic.
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Home prices are steeply declining across some U.S. metros due to high mortgage rates, according to a report.
Although CoreLogic reported last week that overall home price appreciation was 4.9 percent in May year over year, these five markets paint a different picture.
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Five U.S. metros saw home prices plummet year over year in May, including Austin, Texas; San Francisco; New Orleans; Cape Coral, Florida; and North Port, Florida.
In these markets, home prices and sales have declined as buyer demand, including that from investors and buyers interested in building homes, has cooled. High mortgage rates during the traditionally hot spring selling season created an imbalance between buyers and sellers and had a chilling effect on home prices.
Austin led the way with a 3.5 percent decline, while famously high-priced San Francisco was just behind, dropping 2.6 percent. New Orleans home prices declined 0.9 percent.
Two Florida cities also saw prices move lower, with Cape Coral declining 0.6 percent and North Port down 0.2 percent.
According to the New York Post, a spring spike in mortgage rates to approximately 7 percent for a 30-year fixed-rate loan put a damper on the market. In May, 16 of the 100 largest metros also saw price declines, including El Paso, Texas; Gary, Indiana; and Buffalo, New York.
On the other hand, 34 percent of homes sold over asking price in June, a major increase from the 23 percent averaged prior to the pandemic, due to high demand in markets with high prices and low inventory.
According to CoreLogic, approximately 100,000 borrowers were six months or more past due on their mortgages, which hasn’t been the case since the Great Financial Crisis in 2009. During this time, however, mortgages in foreclosure fell to 0.2 percent.
Many borrowers in the last stages of delinquency rebounded, however, avoiding foreclosure.
The ARM share of total outstanding and outstanding conventional mortgages has reached 5 percent. Following the Great Financial Crisis when there was an influx of ARM originations, ARMs totaled nearly 20 percent of outstanding mortgages, but the pandemic brought the share to a low of 4 percent.
The appraisal gap for homes under contract has returned to pre-pandemic levels with homes being appraised at 8.6 percent below their value in June, down from 10.7 percent the previous year. According to CoreLogic, there’s a higher appraisal gap for starter homes, which may reflect a higher incidence of overpayment by inexperienced, first-time homebuyers.
The sale of newly built homes is down year over year by 17 percent for the first half of the year. Of the top 30 U.S. metros, Portland, Oregon, and Las Vegas are the only metros to show an increase in newly built homes this year, up 2 percent.
In June, investors made 23 percent of all single-family home purchases, down five percentage points from January, the lowest investor share in two years.
While existing home sales were down 19 percent year over year, pending home sales showed improvement in June, up 9 percent from last year, which indicates that the market could be heating back up.
Email Richelle Hammiel
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