US Home Prices Decline by Record Margin Since 2009 Financial Crisis: Report

House for sale in Knox County, Tenn., on May 17, 2022. Photo courtesy of Laura LeRoy

Home prices across the United States fell by a large margin in the month of August, while inventory levels stalled, according to a recent report by mortgage analytics firm Black Knight.

Median home prices declined by 0.98 percent in August, after falling by 1.05 percent in July, according to a press release on Oct. 3. July and August have registered the largest one-month price declines since January 2009, when the country was struggling with the financial crisis. They also rank among the eight largest declines on record. Ben Graboske, president of Black Knight, pointed out that with the two consecutive months of declines, the median home price is now 2 percent off from its peak hit in June.

The pullbacks have come after two years of “record-breaking growth,” he noted. U.S. home prices saw a decade’s worth of price appreciation in just two and a half years due to factors such as “record-low interest rates” and historically low volatility, he added.

After rising sharply between May and July, inventory levels stalled in August, growing by only a tenth of levels in recent months due to the fact that many sellers stepped away from the market.

“Right now, prospective sellers are not only coming to grips with falling demand and declining prices due to sharply higher interest rates but they also have a growing disincentive to give up their own historically low-rate mortgages in this environment,” Graboske stated.

“Some may be waiting out the market to see if demand—and prices—return in the spring,” he said. The average 30-year fixed-rate mortgage had an interest rate of 6.7 percent for the week ended Sept. 29, according to data from mortgage lender Freddie Mac. A year ago, the mortgage rate was only 3.01 percent.

Fed Action, Investing in a Home

The housing sector is going through a severe correction as the Federal Reserve has been raising its benchmark interest rates at their fastest pace in decades in a bid to control inflation. The federal funds rate is now in a range of 3.0–3.25 percent, the highest level since before the financial crisis of 2008–09.

In an interview with The Epoch Times, Andre Stewart, CEO of InvestFar, a real estate marketplace and database firm, said that an average homebuyer can expect to pay up to 25 percent more for a home in the current market when compared to 2021. However, people must make sure that the investment is worth it, he warned.

“It’s one thing if you’re buying a home to live in it for a very long time, but most people live there for five to 10 years, and then resell it,” Stewart said. “You want to make sure you’re going to make money on that sale.”

U.S. home prices decelerated in July, with the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index falling by 15.8 percent compared to a year ago.

On a monthly basis, July 2022 home prices declined by 2.3 percent from June, which is the largest deceleration in the index’s history.

Mary Prenon contributed to the report.