The pace of home price appreciation has started to slow. The national average year-over-year home price appreciation was 15% in June, down from 16.2% in May and 15.6% a year prior, according to the American Enterprise Institute’s Home Price Appreciation Index report, released Thursday.
Home price appreciation started to slow after hitting a peak of 17.3% in March 2022, according to AEI.
The report found a wide range in home price appreciation among different metropolitan areas. On the low end of the spectrum was Pittsburgh, which recorded HPA of 6.8%, followed by Baltimore (7.6%) and San Francisco (7.7%). On the other end were three Florida metros, with Cape Coral recording the highest home price appreciation at 32.4%, followed by North Port at 28% and Miami at 25.6%.
“Of the 10 fastest HPA metros, 6 were in Florida (Cape Coral, North Port, Miami, Orlando, Tampa and Jacksonville) and 2 in metros affected by California out-migration (Las Vegas and Dallas),” said Ed Pinto, the director of AEI’s Housing Center, according to a statement. “These metros will continue to benefit from the arbitrage opportunity related to intra-metro price differences, enhanced by the work-from-home economy.”
Tobias Peter, the assistant director of AEI’s Housing Center, added: “Home prices in June increased a stunning 32% in Cape Coral, but that may be sustainable due to a massive supply-demand imbalance, at least over the near term. Cape Coral is still relatively affordable compared to many other Florida and California markets. The median Cape Coral home sold in June for about 25% the cost of the median home sold that month in San Jose.”
The HPA for the higher end of the expensive markets and low end of some FHA markets have been the first to experience the slowdown. AEI said typically, HPA growth in lower price tiers have outpaced the HPA in higher price tiers.
Experts predict the HPA will continue to drop throughout the rest of the year, dropping to 12.5% in July and 10.4% in August.
The report also noted while housing inventory was up 19% year over year in June, to a 1.2 month supply at the current sales pace, it is still less than half of the 2017-2019 level of inventory. In June of 2019, prior to the COVID-19 pandemic, housing inventory was at a 2.7 month supply.