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Home prices remain elevated amid low inventory, rent inflation slowing

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New data indicates there's a record slowdown in home price growth, while apartment rent growth is also starting to show signs of slowing.

Video Transcript

[MUSIC PLAYING]

DAVE BRIGGS: The housing market, is it cooling off, or is it crashing? New numbers out today suggests the former is the case. As any prospective buyer well knows right now, prices are higher than they were a year ago and dramatically more than they were pre-pandemic. However, those price gains are slowing down at a record pace. The annual rate of price appreciation fell two percentage points from 19.3% to 17.3% in June. That's according to mortgage software firm Black Knight.

How far are we from normal? Well, we'd need six more months of that kind of deceleration to return to long-run growth averages. Ultimately here, the lack of inventory will keep prices elevated. Supply up 22% over the last two months, but more than 50% below pre-pandemic levels. Rachelle, it speaks to the fact that you see some headlines about a potential crash, but the underlying data tells you that really isn't possible with these dynamics. And it's similar to what we're seeing with the rent as well.

RACHELLE AKUFFO: I mean, you're right. We still see obviously this imbalance between the supply and demand at the moment. And we are seeing a similar dynamic taking shape in a record-shattering rental market. Nationally, average apartment rents rose 9.4% in the second quarter. That's according to data firm CoStar. And while that's bad, it is actually good news. It's down from the 11% increase in the prior quarter. CoStar estimates that rent will continue to cool, finishing the year 6.2% higher than last year. So obviously, some good news given the affordability crisis. But I know we had guests saying, look, a lot of people got trapped into some of these long leases and rentals, so they still might not even be ready to start looking again.

SEANA SMITH: Yeah, I mean, Rachelle, there's some good news. But certainly, to Dave's point, is such a long way to go. And, Dave, the biggest issue in the housing market right now is the affordability problem. And you talk about that declining home price growth, it's a step in the right direction. Still up over 17%--

DAVE BRIGGS: A huge number.

SEANA SMITH: --compared to a year ago. What'd you say, it's six more months at least to get back to--

DAVE BRIGGS: Of record cooling.

SEANA SMITH: Record cooling. So we're-- it's headed in the right direction. We talked to guest after guest after guest who says the housing market is going to cool. We're seeing that happen. But I think the big question is, how significantly is it going to cool from here?

DAVE BRIGGS: Yeah, I mean, it would be just about impossible, given the dynamics, given the numbers we have, for prices to actually crash. So all indications are, we will continue to cool off throughout the year. But still, this is a real problem when it comes to affordability with rents and lesser a problem when it comes to single family homes, where the inventory is beginning to pick up. A cooling, a leveling off, I think is a positive story. And most realtors, most analysts will tell you that's what is needed in this overheated environment.

SEANA SMITH: Certainly, as a step in the right direction.