What is happening to US house prices?

Home price growth has slowed for the sixth consecutive month, but homeowners shouldn’t expect dramatic price drops, said First American chief economist Mark Fleming.

The June Home Price Index (HPI) report from First American Data & Analytics showed a slight downward revision of last month’s house price growth. The rate from April to May was revised down one basis point to 0.4%.

Despite the cooling trend, house prices were still 54.7% higher than they were before the pandemic in February 2020.

“In June, home prices continued their upward trend and hit another record high, but annualized house price appreciation slowed for the sixth consecutive month,” Fleming said. “Elevated mortgage rates continue to keep homeowners rate locked-in, while reducing affordability for potential first-time home buyers.”

Fleming attributed the slowdown in price growth to a combination of reduced demand and increased supply. However, he emphasized that the national housing market remained fundamentally undersupplied, which will prevent a significant drop in house prices.

“The resulting pullback in demand coincided with an uptick in supply, which is cooling price growth,” Fleming said. “However, housing remains fundamentally undersupplied nationally, which will keep a floor on how low house price appreciation can fall.”

The June HPI report provides a detailed analysis of home price changes across different price tiers—starter, mid-tier, and luxury—based on local market sales data.

Notably, the luxury tier experienced the greatest year-over-year increases in several metropolitan areas:

• Anaheim, Calif.: +6.1% (starter tier), +10.1% (mid-tier), +13.0% (luxury tier)
• Miami: +7.2% (starter tier), +10.7% (mid-tier), +8.8% (luxury tier)
• San Diego: +3% (starter tier), +7.8% (mid-tier), +8% (luxury tier)
• Las Vegas: +6.8% (starter tier), +6.1% (mid-tier), +8% (luxury tier)
• Atlanta: +5.9% (starter tier), +3.7% (mid-tier), +7.6% (luxury tier)

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“High-end home buyers are more immune to mortgage rate fluctuations, and many existing homeowners are sitting on substantial equity that can be used to finance a bigger and better property. As a result, house prices in the luxury price tier increased on an annual basis in all 30 markets tracked,” Fleming said.

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