In July, home prices slipped from their peaks in almost 85 percent of major U.S. real estate markets, with a third showing declines of 1 percent or more and one in ten posting a slide of at least 4 percent, according to Black Knight Data & Analytics, a real estate services firm.

July’s slump followed a 0.77-percent drop in June, Black Knight noted. That was the largest one-month reduction since January 2011 and the first worth noticing in 32 months.

“Annual home price appreciation still came in at more than 14 percent,” Black Knight president Ben Graboske said in a statement announcing July’s result.

“But in a market characterized by as much volatility and rapid change as today’s, such backward-looking metrics can mask more current, pressing realities,” he added.

In June and July, price reductions erased about 5 percent of homeowners’ equity.

“The third quarter of this year will show a more sizable decline,” according to a CNBC report.

Equity has evaporated most quickly in markets that have seen some of the highest prices in recent years, particularly on the west coast.

San Jose homeowners lost 20 percent of their equity, 18 percent in Seattle, 14 percent in San Diego and San Francisco, and 10 percent in Los Angeles.

Sliding home values are unlikely to collapse the housing market, which was a major cause of the Great Recession in 2007.

Today’s homeowners owe just 42 percent of their homes’ value, the smallest percentage on record.

However, if prices fall 5 percent, about 275,000 households still will owe more than their homes would be worth, Black Knight calculated.

More than 80 percent of those households bought their houses in the first half of this year, when the market was peaking.

TREND FORECAST: As we had forecast in “Median Home Sale Price Rises Up Despite Slowdown” (16 Aug 2022), and other articles, the housing market will continue to contract notably but not crash. 

Yet, even as housing prices decline, those who could not afford to get into the housing market when they were spiking will still not be able to do so since mortgage interest rates are at their highest since 2008. As we report in Mortgage Rates Rise Again in this issue, most home loans still will go to households earning above the median income.

For our past coverage of private equity’s spreading footprint in U.S. housing, see:

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