US home price growth: The tides have finally turned

“With a national shortage of more than 700,000 listings, it would take more than a year of such record increases for inventory levels to fully normalize,” Graboske said. “Of course, some metro areas are seeing inventory return to the market more quickly than others.

“San Francisco officially returned to pre-pandemic levels in June, becoming the first major market to do so, with San Jose close behind, where the number of homes listed for sale is just 1% off the June 2017-2019 average. It’s therefore of little surprise to find both metros among the markets where prices are pulling back from recent highs, along with Seattle, San Diego, Denver and others.”

According to Black Knight, this could affect many borrowers who bought into the market at or near recent highs, as roughly 10% of mortgaged properties were purchased over the past year.

Additionally, sales activity has continued its downward trend over recent months due to rising rates and home affordability issues. Seasonally adjusted home sales have declined by more than 21% since the start of the year and are expected to continue going down in the coming months. The slowdown in sales has helped inventory to recover from record lows.

“Factoring in both active listings and sales volumes, the market has ticked up from a low of 1.7 months of inventory at the start of the year to 2.6 months as of June,” Black Knight wrote in the report. “If current trends continue to hold, months of inventory could continue to trend sharply upward in coming months. Black Knight will continue to monitor the situation and report its findings moving forward.”