Home price moderation hasn't hit all markets equally

After peaking earlier this year, U.S. home-price growth has been showing noticeable signs of deceleration, but the extent of it varies widely by region, according to research from First American.

"There remains a structural and long-term national supply shortage in the housing market, but in some cities the pullback in demand is strong and inventory is rising faster," First American Chief Economist Mark Fleming said in a press release.

June housing data showed nominal home prices increasing by 18.5% on an annual basis, down from 20.1% in May, and a high point of 21.6% in March, with all 50 markets tracked by First American reporting some slowing.

"However, the modest price deceleration is not a national phenomenon," Fleming said, noting that the relationship between current home prices and their peak varies by area.

Over the past several months, California cities have topped the list of metropolitan markets seeing the largest drop in home-price growth from their highest levels recorded on First American's index.

After nominal costs surged 23.5% on an annual basis in July 2021, Sacramento home values went up by 10.8% in June, according to First American. The pace of growth in San Francisco declined from 17.5% in July last year to just 6.2% in June. Meanwhile, its neighbor, San Jose, saw the rate of increase slow from 19.5% in February this year to 8.7% in June. San Francisco's June figure also represents the smallest gain in annual price growth across the country.

On the other end of the scale, New York City saw the narrowest margin change between highest and current home-price growth, remaining near 13% from May 2021 to June this year. Just ahead of New York, Miami saw appreciation slow from 34.4% to 33.8% in the same time period, even as the Florida city led the U.S. in annual price surge on an unadjusted basis in June, according to First American.

Slowing appreciation and even reports of reduced asking prices in some markets don't necessarily translate into affordability relief, though.

First American's Real House Price Index, a measure that factors in income changes and interest rates alongside housing costs, increased by 53.3% annually in June, the fastest year-over-year growth in over 30 years. On a monthly basis, the RHPI rose by 3.7% between May and June. By comparison, in May, the index rose by 50.8% annually and 3.8% from April. A rise in the index represents a drop in affordability. 

Price growth, which despite recent moderation, is still above average, was compounded by a more than 2.5% jump in interest rates. 

"Even though household income increased an impressive 4.7% since June 2021, it was not enough to offset the affordability loss from higher mortgage rates and fast-rising nominal prices," Fleming said.

The rapid increase in the RHPI in June marked the fifth consecutive month it had set a record. The states reporting the highest growth of RHPI year over year were concentrated in the Southeast, led by Florida with a 75.6% surge. Behind the Sunshine State were South Carolina at 63.7%, Georgia at 61.6% and North Carolina, which posted an increase of 61.5%. Arizona rounded out the top five at 60.2%.

No states reported a decrease in real house prices.