The country’s least affordable markets are beginning to cool

“While any talk of home values and 2006 might set off alarm bells for some, the truth is that price gains would need to see deceleration at this rate for more than 12 months just to get us back to a ‘normal’ 3-5% annual growth rate,” said Ben Graboske, president of Black Knight Data & Analytics.

Home prices have gone up 10.8% since the start of the year, and 44% since the COVID-19 pandemic began.

In examining the price growth slowdown in May, the Black Knight report also determined trends in housing inventory and affordability, revealing that the markets experiencing the strongest cooling are those with “comparatively poor affordability levels and low inventory deficits.”

In terms of inventory, Graboske explained that there was a slight increase of 107,000 in active listings for May. However, inventory remained 60% below the number of active listings normally seen during this particular time of the year.

“All major markets are still facing inventory deficits, but some have seen their shortages shrink much faster than others,” said Graboske. Among these are some of the hottest housing markets in recent years: San Francisco, San Jose and Seattle. Unsurprisingly, these are also among the markets seeing the strongest levels of cooling so far this year, with annual home price growth rates in each down more than three percentage points in recent months.”