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Annual house price growth saw the ‘slowest single-month pace’ since the early 1970s. Does this mean homebuyers are finally relaxing?

Are home buyers getting much-needed relief in the form of lower home prices?

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Is this the news home buyers are finally looking for? In June, the annual home price growth rate saw “the largest single-month slowdown on record since at least the early 1970s,” according to mortgage data and analytics company Black Knight. What’s more, the agency released its latest Mortgage Monitor report on Aug. 1 with “the largest single-month inflow of inventory for sale in 12 years.”

The report reveals that June was the third straight month of cooling, with annual home prices falling 17.3% in June from 19.3% in May; This is a more pronounced decline than in 2006. (For its part, the US CoreLogic S&P Case-Shiller index also marked a decline, with June “appearing to be a key factor with a more significant pullback in buyer interest” in a report released in late July.) In fact, all 50 top metro markets saw slower growth in June, and one in four major US markets. Growth slowed by 3 percentage points or more.

But why are we seeing this cooling? Holden Lewis, home and mortgage expert at NerdWallet, says mortgage rates are higher than they were at the beginning of the year, forcing buyers to shop for homes in lower price ranges so they can afford monthly payments. “As people buy lower priced properties, they drag down the rate of house price growth. The main lesson this summer is the importance of setting a reasonable asking price,” says Lewis.

What’s more, Zillow economist Nicole Bachaud says the housing market is in the midst of a major transition. “Buyers have hit the affordability ceiling and demand is pulling back, causing homes to accumulate on the market as sales slow. Home sellers are being forced to adjust their expectations and many are choosing to get out of the market and keep their favorable interest rates,” says Bachaud.

To the delight of home buyers and the chagrin of home sellers, Greg McBride, Bankrate’s chief financial analyst, says this is not the housing market it was a few months ago. “Sellers don’t get the moonshot asking price they thought they would, it takes longer to sell and there isn’t a bidding war. Although buyers now have more negotiating power, mortgage rates are over 5% and home prices are still high,” says McBride.

While headline-generating movements can be expected during this transition period, Bachaud says it’s important to remember how much prices have risen over the past decade, not just during the pandemic. “We’re talking about small declines from record highs. A return to near pre-pandemic levels is highly unlikely as overall housing supply remains constrained and demand remains on the sidelines,” says Bachaud. Ultimately, he says, this much-needed market rebalancing should help some first-time buyers catch on. But homeowners retain much of the equity they’ve built up over the years.

Nationally, the housing market hit the reset button in June, as 30-year mortgage rates briefly rose to 6%. “Some buyers withdrew from the market to re-evaluate their price ranges. If rates stabilize between 5% and 6%, we could see a premature surge in home buying in the fall as buyers who were interrupted in the summer return to the market,” says Wood.

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