It’s finally happening. Home prices he peaked in June, after he surged 40% from pre-pandemic levels in the biggest economic boom in decades, started to fall in July. This is evident in a new data set just launched by the American Enterprise Institute’s Center for Housing, one of the top sources for detailed city-by-city figures on everything from valuations to inventory and mortgages. What an amazing sudden change. origin. “The market has just reached a tipping point,” says Ed Pinto, director of the AEI Housing Center. “Prices will continue to fall across the country from August to December. About four out of five metros may see a decline in the next few months.”
Historically, AEI has primarily measured prices in year-over-year format. And by that measure, the housing market still looked solid in June. That month, AEI found that the average home value had increased by 15% since June 2021. But the data also showed that over the 12-month span, “house price growth” or HPA slowed sharply and dropped significantly. From a peak of 17.5% in April.The Issues Pullbacks Raised for American Homeowners: What’s Happening just now, weekly or monthly? Is it possible that prices are actually going up in my city, Atlanta, Phoenix, Raleigh? Dismissed?
AEI’s new data answers that query. Measures show the change in price from one month to the next. The numbers therefore detail exactly when, to what extent and what kind of movement the pattern foresees. They are guides for reading market trends. AEI figures are based on actual financial results for the month as reported in public records. Pinto develops a methodology that compares sales of homes of similar quality, eliminating distortions due to changes in the “mixture” of sales. For example, average prices erroneously increase because the sales share of expensive homes is higher in his June than in his May.
A surprising number of markets have already registered declines
AEI has calculated figures for the 50 most active housing markets in the country. AEI’s table, House Price Growth Rate (MoM), shows month-by-month changes from early 2019 to June of this year. Let’s start with national data. The market as a whole has been in relentless turmoil for so long that he only saw the price retreat twice during that period, by just 0.1% each time. As recently as January, he had US monthly HPA of 2.6%, but in May he slipped to a still-strong 1.1%. However, in June, the rate of increase plummeted in real terms, narrowing to just 0.2%.
Behind the nationwide downturn lies a staggering reversal in various cities that were thriving just months ago. He is the only four metros whose prices have fallen since May in June 2021, and only Louisville, which fell by a meager -0.1% from May to June last year. In April, not one out of 50 cities survived his decline from March. But in his June of this year, more than 21 locales dropped from his May prices, some of them significantly lower. In general, the plunge in prices occurred in the expensive markets of the West Coast and in the big cities of the West, where the exodus from California attracted large numbers of buyers. The 11 worst-hit addresses fall into this category. The biggest loser was San Francisco -3.8%, followed by San Jose (-3.2%). Other western cities registering significant declines include Seattle (-1.8%), Los Angeles (-1.5%), Portland (-1.3%), Denver (-0.9%) and Phoenix (-0.6%). ) there is. Nearly all of these metropolitan areas have fluctuated through his February, with San Francisco up 2.8% from January, San Jose up his 3.9%, and Seattle up 3.5%.
“The most obvious trend is the retreat of these West Coast cities, affected by the California madness,” Pinto says. A fast-shrinking rank of buyers hits the mark, despite a low volume of homes historically being sold, as affordability has dropped from low levels. Q4 2019 From the first quarter of this year, prices jumped from $1.2 million to $1.6 million in San Joe, $575,000 to $819,000 in Seattle, $466 to $623,000 in Denver, and $340,000 to $516,000 in Phoenix. The only western market to still show strength was Las Vegas, a venue that has cooled but maintained a 0.2% gain from May, and prices rose 1.8%, marking a consistent month-over-month gain. Boise continues to thrive as a favorite destination for work-at-home refugees from California. They can sell a house in San Jose, for example, get a much larger residence for half the cost of a second city, and still have hundreds of thousands of dollars in the bank.
In recent months, the hottest markets have flocked to the Sunshine States. After registering annual increases in the mid-30% range, Cape Coral is settling back rapidly (you can read my recent feature article on the Cape Coral market). here). From April he rose 2.8% through May, but fell to minus 1.0% in June. Tampa, Northport, Orlando, Jacksonville and Miami have all fallen significantly since their February price hikes, but are still up between 0.2% and 1.1%.
In contrast, many older subways that did not experience significant price increases have shown remarkable resilience for one simple reason: many remain relatively inexpensive. Delphia, Kansas City, Columbus and New York all ranked in the top 10 for May-June gains.Boise the Big tied for #1 appleachieved a 1.8% month-on-month increase and is one of the few solid companies to emerge on an upward trajectory.
June downdraft fundamentally changes outlook for this year and 2023
Pinto also gets a good look at where the price is headed by looking at Optimal Blue’s “Rate Lock” data. These numbers reflect contract prices for sales ending in approximately 90 days. For Pinto, the interest rate lock trend marks a decline in prices at the national level from July 2022 to his December. “From there, prices should fall by 3% to 5% from June levels by the end of the year. These total gains will accumulate gradually over the seven months from June to December,” Pinto said. expects home prices to remain 4% to 6% higher than in December 2021 by the end of the year, but likely to decline.
Pinto predicted that if overall prices fell about 4% from here to the end of the year, far more cities would see price declines month-over-month than the 21 cities that were negative in June. I’m here. “I wouldn’t be surprised if in a few months he saw a decline in 40 cities,” he says.
So where does Pinto see the values heading into 2023? “In the last few weeks, mortgage rates have dropped from 6% to about 5.5%,” Pinto said. “If interest rates continue to be cut, that will help the rise.” He notes that while inventories are rising, they remain very low. “At the current level of demand, we still have about a month of supply,” he says. “It takes seven months of ‘supply’ to get a price drop, and that could be a long way off. For Pinto, the combination of stable or declining interest rates and a limited amount of homes for sale will likely keep him up 4% to 6% next year.
Still, Pinto said predicting the future of housing has never been more difficult. “There are so many factors pushing and pulling in different directions,” he says. “My crystal ball is getting cloudier.” AEI’s new monthly numbers will allow homeowners to monitor market trends, not just over time. People are very concerned about what today’s turbulent times mean for the future of their greatest assets. I want to now they can. AEI numbers don’t give homeowners a crystal ball. But by following the latest AEI data, you can pinpoint trends in a market far more important to most Americans than any other.
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