Fitch: Rate of U.S. Home Price Growth Continuing to Flatten Out
Fitch Ratings, New York, said the pace of home price growth in the United States appears to be slowing from a gallop to a trot.
The agency’s quarterly sustainable home price report said national home prices grew by 3% annually in first-quarter, compared to 4% annually in the fourth quarter.
“Annual home price growth is now at the slowest rate in seven years, but the slowdown should plateau due to the recent drop in interest rates and the limited supply of new homes,” said Fitch Managing Director Grant Bailey.
Earlier this month, Black Knight, Jacksonville, Fla., said home prices rose by just 1 percent in March, bringing annual appreciation to just 3.8 percent, the first time since 2012 that home prices have fallen below the 25-year average of 3.9 percent. In a separate report, CoreLogic, Irvine, Calif., said its Home Price Index showed home prices rose by 3.6% in April from a year ago, the first acceleration since March 2018. On a month-over-month basis, prices increased by 1%
Fitch noted the 30-year fixed mortgage rate has come down to its lowest level in nearly two years (3.82%) and monthly supply of new residential homes fell to under six months through April. Only a limited number of housing markets appear to be at risk for a price correction.
The Mortgage Bankers Association this week said average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.12 percent from 4.23 percent, a two-year low. MBA Associate Vice President of Economic and Industry Forecasting Joel Kan said interest rates have been pulled down by trade tensions with China and Mexico, the financial markets reacting to more bearish communication from several Fed officials and weaker than expected hiring in May.
“Demand is still relatively strong, but there is likely some restraint from prospective buyers, driven by some economic uncertainty,” Kan said. “Furthermore, housing supply is still very tight for first-time buyers.”
Fitch said many of the overvalued housing pockets are concentrated in Texas, Florida and California. Home price growth has slowed notably in Los Angeles with prices falling 1.3% annually last quarter. Home price growth in Las Vegas also slowed last quarter, though it remains the most overvalued housing market in the country (20%-24% overvalued).
The CoreLogic Market Condition Indicators reported 37% of metropolitan areas have an overvalued housing market as of April. Twenty-six percent of the top 100 metropolitan areas were undervalued, and 37% were at value. When looking at only the top 50 markets based on housing stock, 42% were overvalued, 16% were undervalued and 42% were at value.
