Photo: Robert Clark

US home prices were up again in the third quarter of 2018, but have started to cool.

Weakening demand due to rising interest rates could be slowing price appreciation in some housing markets, according to a new report from ATTOM Data Solutions.

Rising rates are influencing many first-time buyers who don’t have a lot of wiggle room in their budget, and many home sellers who are choosing to stay in their homes longer to keep their current rate.

“The continued slowdown in the rate of home price appreciation nationwide and in many local markets is a rational response to worsening home affordability, which has deteriorated at an accelerated pace this year due to rising mortgage rates,” writes Daren Blomquist, senior VP at ATTOM Data Solutions, in a statement.

At the national level, homes (including both single-family homes and condos) sold for a median price of $256,000, up nearly 5 percent year-over-year and 1 percent from the previous quarter. This was the slowest pace of annual home price appreciation since the second quarter of 2016.

Median home prices in the third quarter were 11 percent higher than the pre-crisis peak of $230,000 recorded in the third quarter of 2005, and a whopping 77 percent above the post-recession price of $145,000 at the start of 2012.

ATTOM reports that home price appreciation is now slowing in nearly half of the largest 150 markets.

Bucking the national trend, annual home price appreciation accelerated in 51 percent of the markets analyzed including San Jose, California, Las Vegas, Nevada, San Francisco, California, and Atlanta, Georgia — all of which posted double-digit year-over-year gains in median home prices.

In the third quarter, median home prices were above their pre-recession peak in 69 percent of the metro areas analyzed.

“The recent rise in mortgage rates has been a strong enough headwind to slow home price appreciation in many markets, even hot markets like Los Angeles. Affordability was already becoming an issue in these markets, and the higher mortgage rates caused those markets to reach an affordability tipping point that pushed a critical mass of potential homebuyers out of the market,” Blomquist tells Livabl.

Sellers who sold in the third quarter sold their home for an average of $61,232 above the purchase price — the highest average home seller price gain in over 11 years. Homeowners with the highest average home seller percentage gains were in San Jose, California (108.7 percent).

The average tenure among homeowners who sold in the third quarter was 8.23 years, up from an average tenure of 7.97 years recorded last year at this time and a new record high (going back as far as homeownership tenure data is available, the first quarter of 2000).

“The biggest contributing factor to increased housing tenure is low inventory of new homes being built relative to historical standards, particularly new homes that are not at luxury price points. Because of that, homeowners who in past cycles would have moved up into homes that are bigger or in better locations are more likely to just stay put,” says Blomquist.

That, in turn, is locking up inventory for prospective first-time homebuyers. Blomquist says this inventory logjam, of which longer homeownership tenures are a symptom of, is continuing to put upward pressure on home prices given the imbalance between demand and supply.

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