Ed Pinto, Director of the American Enterprise Institute’s Housing Center and one of the country’s leading experts on residential real estate, on October 20th, presented a new custom chart showing price changes in the 60 largest metropolitan areas in the United States. has been sent by email. The columns displaying these numbers are almost uniformly red. More than 50 of the registered cities have seen declines, and many declines are already severe.
The US West has been hit hardest, with cities that ranked among the nation’s most expensive markets before the post-coronavirus economic boom now far more expensive, with this year’s Interest rates on 30-year mortgages are especially likely to double to above 7%. Surprisingly, his two months in April and his May were all plummeting and rising in sync.
San Jose suffered the biggest decline, dropping 10.8% from its April peak to September. The next losers from all-time highs are San Francisco (-8.5%), Seattle (-8.2%), Denver (-5.8%), San Diego (-5.2%), Portland (-5.1%) and Las Vegas (-4.8) %) and Phoenix (-4.4%). For example, in Seattle, the median price was around $710,000 in April 2021, but this year he surged 18% to $840,000 in April. Phoenix climbed even faster, going from $430,000 to $535,000 in the 12 months from May to May, a 24% jump.
Most of the Sunbelt markets, including Dallas, Houston, Orlando, Atlanta, Raleigh, Northport and Palm Bay, Fla., performed better, retreating between 0.5% and 1.6% from their highs. Prices also exploded in those regions during his year ending in April or May. But they kicked off the post-COVID boom at a much lower price point than California and other hot West Coast markets, mostly because of ample new construction. I kept the price. Only his two of the 60 cities, Milwaukee and Greenville, South Carolina, set new highs in the spring, while his three others, including Memphis and Orlando, remained flat.
October 19th, Focus updated his chart To show the change from August to September, let’s look at month-over-month price movements. The same pattern of virtually universal pullbacks marked by September highs continues. Of the 58 markets for which AEI provided figures, 40 were down or flat. But of the 18 stocks that rose in September, all but two fell in his August, erasing September’s gains or slipping into negative territory over the past two months. Only two markets secured significant gains from July to September, and only two – Milwaukee and Greenville – set new highs.
Since the decline began in July, it fell 2.1% nationally through September. Pinto deploys data from mortgage marketplace platform Optimal Blue to predict the direction of housing over the next two months. Optimal Blue collects prices for newly signed contracts with sales ending in approximately 45 days. Optimal Blue figures show losses of 0.6% in October and 0.8% in November. Taking the 0.7% midpoint, prices are now declining at an annual rate of about 8%.
Pinto predicts the damage will spread from the West Coast to low- and mid-markets, especially the Northeast.
In a telephone interview, Pinto warned that the downshift, which hit the ultra-pricey Western markets first, will soon shift to states with higher proportions of affordable housing. “It’s the first to fall because it takes away and suffers the most when interest rates rise,” he says. and middle-income borrowers have a harder time qualifying for a mortgage. fannie mae, freddie mac In the “high” price quintile, the number of months needed to sell all listings at the current rate of demand has already tripled from a record low of 1.5 months to 4.5 months and is declining further. He foresees that, he points out.
So far, the low-end and mid-low-end categories have recovered much better than the high end, as Fanny and the FHA have demanded less stringent income standards than banks that primarily serve high-income buyers. showing power. “The earliest modifications were made in the West, and the modifications will continue and then spread across the country,” Pinto said. He sees two trends in him that could put pressure on mainstream housing prices. “First of all, unemployment is not yet a problem, but it will be. We are still at record lows. We’re going to have bad sales, and inventory will go up.. The process is just beginning,” warns Pinto.
The second is the risk of rising gasoline prices. Or, in a state where energy is so expensive right now, it will continue to cost your wallet. “Rising gas prices are often the canary in the coal mines against falling house prices,” he says. “People who drive far to commute will say, ‘I can’t afford to live any further,’ because they have moved far from the city to find affordable homes. The trend is to build inventories, reduce demand, and push prices even lower.” Rising unemployment combined with gas prices in states (such as California and Illinois) that are already very expensive Stay at current levels, or stay at current levels, Pinto predicts that affordable FHA homes will go on a steeper downward trajectory. .
In Pinto’s view, the Northeast and Illinois will bear the brunt of the upcoming storm targeting the low end. “New York, New Jersey, Connecticut, Rhode Island, and Massachusetts have seen massive outflows to the Sun Belt, and so has Illinois,” he says. “It’s already reducing demand. Kerosene prices are very high in New England. Gas prices are rising on top of normal inflation. Plus, these states are in a zone of rust and frost. Those low-end markets will be hit particularly hard if unemployment rises significantly.” Pinto, meanwhile, said places like Florida, Carolina and Texas saw relatively strong job growth, while the Northeast and Illinois We predict it will suffer a smaller decline as it continues to benefit from the phenomenon hitting the state, the continued outflow to the United States. sun belt. For Pinto, high-end struggles are a harbinger of what’s to come. States that have lost people and jobs could quickly lead to a low-end decline that has proven to be the most resilient so far from a surprising drop in the housing market.
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