Home News Redfin: These housing markets are the most at risk of falling home prices

Redfin: These housing markets are the most at risk of falling home prices

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Homebuyers have had enough. Soaring mortgage rates In addition to record home price increases —42% increase since pandemic outbreak— pushed monthly mortgage payments to unattainable levels for tens of millions of would-be buyers. Housing market adjustment it just gets more intense.

This week, on a year-on-year basis, Mortgage purchase applications down 18%. in the meantime New home sales down 17%When Single-family home starts down 16%.

Even if housing transactions plummetwe have not yet returned to a balanced market. Inventory levels remain at a staggering 49% Below July 2019 levels, most sellers, at least for now, are offering enough leverage to refrain from selling below market prices that hit earlier this year. That said, as inventory levels continue to rise, some local housing markets may see real year-on-year price declines in 2023.

On Friday Redfin released a “risk score” that identifies the housing markets most at risk of a “housing downturn.” The higher the market ‘risk score’, the more likely it is that house prices will fall year-over-year. In all, Redfin examined 98 regional housing markets and assessed factors such as home price volatility, average debt-to-income ratios, and home price growth.

Of the 98 markets measured by Redfin, Riverside was most likely to see a “housing downturn.” They were followed by Boise, Cape Coral, Northport, Las Vegas, Sacramento, Bakersfield, Phoenix, Tampa and Tucson.

popular Destinations such as Boise, Phoenix, and Tampa, where home prices soared during the pandemic, are most likely to see year-over-year declines in home prices, compounded if the economy hits a recession. . Some economists believe that is likely as inflation continues and stock markets falter. Homeowners in these areas looking to sell may want to list their homes immediately to avoid potential price drops. ” A Redfin researcher wrote:.

Which seller is least likely to lose its price? Redfin says Akron. Markets like Philadelphia, El Paso, Cleveland and Cincinnati are not far behind.As pandemic housing boom Once taken off, homeowners in those locations saw less investor activity and house price appreciation was more modest. In the midst of the boom, homeowners in places like Akron undoubtedly had his FOMO after seeing his peers in Austin and Boise experiencing exorbitant levels of home price appreciation. rice field. But now homeowners in markets like Akron and Cleveland are probably grateful: Historically speaking, The steepest housing adjustments usually occur in the fastest growing markets..

“Relatively affordable northern metropolitan areas in the Rust Belt, such as Cleveland and Buffalo, are the most resilient during recessions. to proceed. Dismiss, ” A Redfin researcher wrote:.

Quarterly Moody’s Analytics calculates “overvalued” or “undervalued” figures for approximately 400 marketsThe company aims to see if fundamentals such as local income levels can support local housing prices. It only matters if the housing market is significantly “overvalued”. bad news? In the first quarter of 2006, the median US housing market was he overvalued by 14.5%. In the first quarter of 2022, Moody’s estimates that the median regional housing market is overvalued by 23%..

Just because a house is decoupled from underlying economic fundamentals doesn’t mean the market will see housing prices plummet. But if the market is significantly “overvalued,” home prices will likely fall in the event of both a housing adjustment and a recession. Moody’s Chief Economist Mark Zandy said: luck A housing market “overvalued” by more than 25% 5% to 10% drop in house prices. Prices can fall as much as 15% to 20% in these markets..

“Booming” markets like Boise and Austin are already seeing the most rapid corrections. See our inventory. Over the past six months, inventory levels have surged 161% and 220% in Boise and Austin, respectively.

Earlier this month, John Burns Real Estate Consulting said: luck that Boise poised to become first housing market to see prices drop year-over-yearReal estate research firms predict it could be as early as December. That would require Boise home prices not only to erase all his spring 2022 gains, but to fall below December 2021 prices.

“In many housing markets, the last 10% of house price increases are purely ambitious and irrational, and it’s going to come to light really fast,” said Rick Palacios, Jr., John’s head of research. Burns Real Estate Consulting “Exactly what we are seeing right now.”

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