Home price gains have finally met the law of gravity in metro Denver, with the monthly pace of appreciation in May at about half the level seen in April and a quarter of the pace seen in March, according to the S&P CoreLogic Case-Shiller home price indices.
Metro Denver home prices rose a still robust 22.2% year-over-year in May, not too far off the 23.6% gain measured in April, according to the closely-watched index. But measured month-to-month, appreciation rates are coming down fast — from a record 4.5% monthly rate in March, to a stellar 2.5% pace in April to a still strong but tamer 1.1% in June.
By any measure, the 1.1% monthly gain, were it to continue, would represent a very strong annual gain of 13.2%. But annualizing April’s gain results in home price appreciation of 30% year-over-year. Another way to look at the deacceleration underway — metro Denver in two short months has gone from its fastest pace of monthly appreciation on record to the 78th fastest in an index that goes back to January 1987.
Nationally, gains are slowing as well, but not as sharply as in Denver. Monthly appreciation went from a 2.3% pace in April down to a 1.5% pace in May. But annual gains in metro Denver still remain ahead of the 19.7% pace seen nationally. Florida remains on fire, with the home index for Tampa up 36.1% and Miami up 34%. Dallas home price gains are running at a 30.8% annual rate, while those in Phoenix are up 29.7%.
Yet, those red-hot annual gains mask a broader slowing that is underway as higher interest rates and higher home prices weigh on affordability and buyer demand.
“Slowing price growth is a reflection of changing tides in the housing market. Sales volume has slumped, inventory is on the rise and homes are spending more time on the market,” said Zillow economist Nicole Bachaud in comments on the Case-Shiller numbers.
Just as the Federal Reserve hopes it can engineer a “soft landing” for the economy rather than a hard recession, many who make their living in residential real estate are crossing their fingers for the return of a “balanced market.”
“Homebuilders are scaling back their activity, opting to finish the projects they’ve begun rather than take on new ones. And the demographic forces that helped propel demand in recent years remain in place, keeping some upward pressure on prices in the longer-term. For now, though, the housing market is undergoing a sea change that appears to have rendered the days of historic price growth as a thing of the past,” Bachaud said.