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According to Black Knight, Inc’s Home Price Index (HPI), annual growth rates have been reaccelerating driven by the price declines year-over-year which provide a lower starting point as it was by July 2023 gains themselves.
Black Knight predicts that August’s data (when released) will likely see further reacceleration in annual growth with prices already up a seasonally adjusted 2.9% from August 2022 and up 4.4% since January 1.
At the same time, non-adjusted monthly gains fell below their 25-year average significantly outpacing historical averages from February through June, which according to Black Knight, may be signaling a slowdown may be underway.
While home prices rose on both regular and seasonally adjusted bases, after five months of above average gains, July's 0.23% non-adjusted change was smaller than the 25-year average increase of 0.34% for the month
The HPI also revealed that in 99 of the top 100 largest metropolitan areas tracked by the report, seasonally adjusted price gains were recorded, but those numbers have cooled compared to past reports.
Rate lock and transaction data both point to slowdowns in demand, along with the price per square foot on closed sales fell alongside the average non-adjusted purchase price on locked loans.
Even with interest rates hovering near 7.25%, home price growth continued in July to push home prices to yet another record high. However, as Black Knight VP of Enterprise Research Andy Walden explains, there were some mixed signals in the market data for July, raising questions about a potential downshift.
"Home prices continued to rise in July, hitting a new record high for the third month running," said Walden. "After picking up some small momentum in May and June following 14 straight months of slowing, the annual growth rate spiked to 2.3% in July. Further reacceleration is likely on tap for August as well, given that adjusted prices are already up 4.4% so far this year. Even if seasonally adjusted prices were to stop rising tomorrow, annual home price growth would climb to +2.9% by August and cross +4% by November, simply due to price gains that are already 'baked in.' If price gains were to maintain their current pace – which is unlikely given how tight affordability has become – it would result in annual gains returning above 7.5% by the end of the year. Either way, further acceleration in annual appreciation is almost a certainty for August. But that's only half the story in July's data – the housing market is sending somewhat mixed signals.
"While home prices rose on both seasonally adjusted and non-adjusted bases, July's 0.23% non-adjusted month-over-month growth was smaller than the 0.34% non-adjusted increase July has seen on average over the past 25 years, suggesting a possible transition may be underway," Walden continued. "Indeed – in addition to monthly gains slowing below long-term averages – Black Knight rate lock and sales transaction data also points to lower average purchase prices and seasonally adjusted price per square foot among recent sales. All of these factors combined underscore the need to focus on seasonally adjusted month-over-month movements rather than simply relying on the traditional annual home price growth rate."
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