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May 2023 Mortgage Monitor

Housing Market Reignites as Home Prices Hit New Record High in May; Inventory, Affordability Continue to Plague Potential Buyers

  • The seasonally adjusted ICE Home Price Index (HPI) hit a new record high in May, with the pullback in prices late last year having now fully reversed itself
  • Twenty-seven of the 50 largest markets – primarily in the Midwest and Northeast – have returned to their prior home price peaks, or set new highs this spring
  • Marking the fifth consecutive month of gains, May’s 0.7% seasonally adjusted monthly increase equates to an annualized growth rate of 8.9%, suggesting a coming inflection in annual home price appreciation (HPA)
  • As of May, annual home price growth sat at 0.1%; however, if recent trends hold true, that annual home price growth rate may turn and begin trending higher as early as next month
  • For-sale inventory improved modestly but is still 51% off pre-pandemic levels and remains a massive challenge, putting upward pressure on home prices despite Fed attempts to cool the market via higher rates
  • Inventory levels have decreased in 95% of major markets this year, with the largest swings in Western locales such as Phoenix; Boise, Idaho; Ogden, Utah; San Francisco and Colorado Springs, Colo.
  • Each of these metros had moved into inventory oversupply late last year as sales dried up, but have since swung back more than 30 percentage points year-to-date as compared to pre-pandemic levels
  • Affordability continues to suffer; as of June 22, with 30-year rates at 6.67%, the principal and interest (P&I) payment needed to buy the median-priced home rose to $2,258, marking the highest payment on record
  • Nationally, it takes 35.7% of median household income to make the average P&I payment; only income growth since fall of 2022 has kept May 2023 from being the most unaffordable month for housing in the past 37 years

JACKSONVILLE, Fla. – July 10, 2023 – Today, the Data & Analytics division of ICE released its latest Mortgage Monitor Report, based on the company’s industry-leading mortgage, real estate and public records data sets. As the nation approaches the traditional end of the spring homebuying season, there are distinct signs of market reheating – almost universally in markets across the United States. As Vice President of Enterprise Research Andy Walden explains, five consecutive months of gains have completely reversed the pullback in home prices that began in July 2022.

“There is no doubt that the housing market has reignited from a home price perspective,” said Walden. “Firming prices have now fully erased the pullback we tracked through the last half of 2022 and lifted the seasonally adjusted ICE HPI to a new record high in May. Though the backward-looking annual growth rate dipped to 0.1%, May’s exceptionally strong +0.7% month-over-month gain would equate to an annualized growth rate of 8.9%, suggesting the annual home price growth rate would remain at or near 0% for only a short time before inflecting and trending sharply higher in coming months. The reheating is widespread, with more than half of the 50 largest U.S. markets seeing prices at or above 2022 peaks. While prices are still well below peak levels across the West and in many pandemic boom towns, price firming in recent months has begun to close those gaps. Austin, Texas, remains the notable exception; inventory there continues to run above pre-pandemic levels, putting downward pressure on prices, which have fallen to -13.8% below peak, the largest gap of any market. Just eight of the top 50 markets are currently more than 5% below their 2022 peaks.

“Unlike Austin, for-sale inventory is moving the other direction in much of the country. Active listings have deteriorated in 95% of major markets so far this year and, overall, we’re still down more than 50% from pre-pandemic levels. New construction starts and completions were both strong in May, which is welcome news. However, most projects underway in the month were 5+ multi-family units, as opposed to single-family residential (SFR) units. SFRs made up just 40% of the total and is now at construction levels still approximately -30% below the 2005 peak. As it stands, housing affordability remains dangerously close to the 37-year lows reached late last year, despite the Federal Reserve’s attempts to cool the market. The challenge for the Fed now is to chart a path forward toward a ‘soft landing’ without reheating the housing market and reigniting inflation. But the same lever used to reduce demand – that is, raising rates – has not only made housing unaffordable almost universally across major markets, it has also resulted in significant supply shortages by discouraging potential sellers unwilling to list in such an environment, further strengthening prices. At this point, even if rates come down, but not so sharply as to entice potential sellers out of their sub-3.5% mortgages, it could risk a widespread reheating of home prices across the U.S.”

Digging deeper into the ICE HPI data for May, this month’s report looks at the significant degree to which many Western markets – which had been seeing sharp declines in 2022 – have begun to reheat this spring. San Jose, Calif., is a noteworthy example; homes in the metro shed 10% of their home value faster than any market on record last year. Now, with inventory levels beginning to plummet again, prices are reheating and at +1.4% in May, San Jose experienced the second largest month-over-month price gains of any market on a seasonally adjusted basis. San Jose is not alone among western markets; San Diego (+1.1%), Los Angeles (+1.0%), San Francisco (+.9%), Seattle (+.9%), and Sacramento, Calif., (+.8%) all experienced exceptional home price growth in May as well. Hartford, Conn. (+1.6%) – which faces a combination of relative affordability, strong demand, and the deepest inventory deficit of any U.S. market (-82%) – continues to lead price growth overall.

Much more information on these and other topics can be found in this month’s Mortgage Monitor.

About Mortgage Monitor

ICE manages the nation’s leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the ICE Home Price Index and Collateral Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

ICE’s research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.icemortgagetechnology.com/resources/data-reports

About Intercontinental Exchange

Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds and operates digital networks that connect people to opportunity. We provide financial technology and data services across major asset classes helping our customers access mission-critical workflow tools that increase transparency and efficiency. ICE’s futures, equity, and options exchanges – including the New York Stock Exchange – and clearing houses help people invest, raise capital and manage risk. We offer some of the world’s largest markets to trade and clear energy and environmental products. Our fixed income, data services and execution capabilities provide information, analytics and platforms that help our customers streamline processes and capitalize on opportunities. At ICE Mortgage Technology, we are transforming U.S. housing finance, from initial consumer engagement through loan production, closing, registration and the long-term servicing relationship. Together, ICE transforms, streamlines and automates industries to connect our customers to opportunity.

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Media Contacts

Mitch Cohen
704.890.8158
mitch.cohen@bkfs.com​​​

Katia Gonzalez
678.981.3882
katia.gonzalez@ice.com