Annual Home Price Growth Continues to Cool as Demand Rises

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor report, showing a modest rise in homebuyer demand that led to home prices strengthening for the third consecutive month in March, as both January and February were upwardly revised to show positive movement in prices.

As Black Knight VP of Enterprise Research Andy Walden explains, while historical trends would suggest an increase of new listings in the spring, the inventory shortage at the root of this home price strengthening has instead worsened as the country moves further into the traditional homebuying season.

"Home prices rose a seasonally adjusted 0.45% in March at the national level," said Walden. "A modest bump in homebuyer demand ran headlong into falling for-sale supply, leading to the third consecutive monthly increase in home prices after they'd been pulling back from recent peaks through the tail end of 2022, essentially nationwide. In fact, just five months ago, prices were declining on a seasonally adjusted month-over-month basis in 92% of all major U.S. markets."

Walden continued: "Fast forward to March, and the situation has done a literal 180, with prices now rising in 92% of markets from February. Despite the home price strengthening of these past couple of months, the backward-looking annual growth rate continued to cool as the influence of the red-hot spring 2022 market fades in the rearview mirror. Prices are now up just 1.0% year over year, with the annual growth rate on track to fall to roughly 0% by April.  That said, low inventory levels will limit just how far that metric will fall in coming months."

Key Findings:

• According to the latest Black Knight HPI, home prices rose in March on both non-adjusted and seasonally adjusted bases, driven by a modest bump in demand and further deterioration in for-sale inventory levels.
• Sales activity experienced a modest increase for the second consecutive month in March, with seasonally adjusted volumes up 13% from January's low, but still roughly 13% below their pre-pandemic average.
• At the same time, Collateral Analytics data from Black Knight showed the supply of active for-sale listings fell for the sixth straight month, dropping to the lowest level since April of last year.
• Further, 30% fewer new listings came on the market in March as compared to pre-pandemic norms, with the deficit having increased from 27% below pre-pandemic norms in February and 25% below in January.
• Home prices were up a seasonally adjusted 0.45% in March (+1.38% non-adjusted) for the third consecutive month of increases, with 92% of markets seeing prices increase in the month.
• Despite prices hardening this spring, annual home price growth continues to cool; prices were up just 1.0% on an annual basis, a backward-looking metric that has been falling by 1.3-1.4% each month since the start of 2023.
• While home prices in many western and pandemic boom markets are still well off their peaks, 40% of major markets have seen prices return to peak levels.
• Of the top 50 markets (by population), only Austin (-0.7%), Salt Lake City (-0.12%) and San Antonio (-0.07%) are still seeing prices falling on an adjusted basis, with Phoenix and Dallas effectively flat month over month.

"The strengthening in home prices is the direct result of a second month of modest increases in sales volumes meeting a continually shrinking for-sale inventory. Our Collateral Analytics data showed the supply of active listings fell for the sixth straight month, to the lowest level since April 2022. On top of that, March saw deterioration in supply among 90% of major markets. New listings aren't filling the gap either – 30% fewer properties hit the market in March as compared to pre-pandemic norms. That deficit is now increased in each of the last six months and is up from -27% in February and  -25% the month before. Given the modest rise in sales volumes, current available inventory represents just 2.6 months of supply on a seasonally adjusted basis, tipping the scale back toward sellers in a tightly constricted market."

This month's report also draws upon daily rate lock data from Optimal Blue, a division of Black Knight, to help gauge the impact of today's volatile rate environment on mortgage lending activity. Rates remained volatile through March and April – from a high of 6.85% in early March, to 6.21% by early April, then back up above 6.5% by the middle of the month. More noteworthy in recent weeks is the pullback in purchase rate lock volumes despite overall lower mortgage rates than we saw in March.

Through April 26, rates have averaged 6.38% for the month, down from the 6.56% average daily rate for the month of March. While rates have eased, and the heart of the traditional home buying season takes hold, purchase rate locks have pulled back in recent weeks, falling 18% (unadjusted) from their late March highs.

Refinance volumes are also down 17% among cash-outs and 24% among rate-term refis since mid- to late March. This trend is worth watching closely in coming weeks given the delicate balance of supply and demand in today's market.

To read the full report, including more data, charts and methodology, click here.