First Signs of Slowdown: Prices Down 0.3% Month-over-Month
Asking home prices decreased 0.3% in July – the first month-over-month decline since November 2012. Although monthly changes can be volatile, quarter-over-quarter changes – which are less jumpy – confirm the price slowdown: asking prices were up 3.3% quarter-over-quarter in July, down from a peak of 4.2% in April.
What’s driving this slowdown? As we’ve said, rising mortgage rates, more inventory, and declining investor demand all play a role in dampening price gains, but it’s hard to tease out which factor matters most. Inventory has increased 6% since January (even after adjusting for seasonality), and mortgage rates started their sharp rise in early May.
Prices are up 11.0% year-over-year – a new record since the recession – but the year-over-year change is an average over the past 12 months. That’s why the price turndown affects the month-over-month and quarter-over-quarter numbers first, even though the year-over-year change is increasing – for now.
Rents Up 3.9%, But Prices are Rising Faster Everywhere
Rents are up 3.9% year-over-year nationally. That’s a big increase compared with inflation or with income growth – but small compared with price gains. Even with the beginning of the price slowdown, prices outpaced rents in all 25 of the largest rental markets, making July the first time that rents aren’t rising faster than prices in any major market. Rents are rising fastest in the artisan coffee belt – Seattle, San Francisco, and Portland – along with Houston.