Rising mortgage rates and inflation in the wider economy caused housing demand to drop sharply in June, forcing home prices to cool down.

Home prices are still higher than they were a year ago, but the gains slowed at the fastest pace on record in June, according to Black Knight, a mortgage software, data and analytics firm that began tracking this metric in the early 1970s. The annual rate of price appreciation fell two percentage points from 19.3% to 17.3%.

Price gains are still strong because of an imbalance between supply and demand. The housing market has had a severe shortage for years. Strong demand during the coronavirus pandemic exacerbated it.

Even when home prices crashed dramatically during the recession of 2007-09, the strongest single-month slowdown was 1.19 percentage points. Prices are not expected to fall nationally, given a stronger overall housing market, but higher mortgage rates are certainly taking their toll.

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