Tag Archives: Home Prices

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Home sales could plunge in 2023. These cities could see the biggest dips.

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Home sellers should brace themselves for a tough year ahead, with one real estate group forecasting that property sales could tumble in 2023 as more buyers are sidelined by rising mortgage rates and out-of-reach home prices. 

The number of homes sold will likely plunge 14.1% to 4.53 million homes, representing the lowest number of property transactions since 2012, when the U.S. was still recovering from the housing crash and Great Recession, according to according to Realtor.com’s 2023 Housing Forecast. 

The pandemic triggered a massive boom in real estate sales, bolstered by a combination of record-low mortgage rates and work-from-home-orders from many employers. Since early 2020, home prices have surged almost 40%, while mortgage rates have more than doubled since year-start, a double-whammy that has priced many buyers out of the market. 

Sellers may feel the brunt of that impact next year, according to the new Realtor.com forecast. 

“High home prices and mortgage rates [will] limit the pool of eligible home buyers” in 2023, it said.

Home sales are expected to dip the most in California and Florida. The biggest decline in sales volume will be in these cities, Realtor.com forecasted:

  • Ventura, California: A decline of -29.1%
  • San Jose, California: -28.8%
  • Bradenton, Florida: -28.7%
  • San Diego, California: -27.3%
  • Palm Bay, Florida: -18.3%
  • Los Angeles, California: -15.8%
  • Tampa, Florida: -15.6%
  • Tucson, Arizona: -14.7%
  • Fresno, California: -13.7%
  • San Francisco: -13.3%

Possible bright side for sellers

If there’s a bright side for sellers, it’s that the average sales price in the nation’s top 100 markets is likely to increase next year by an average 5.4%, according to Realtor.com’s 2023 Housing Forecast. 

Not everyone’s outlook on home prices in 2023 is as sunny. Some economists are predicting that real estate values could plunge by as much as 20% next year due to the surge in mortgage rates and economic uncertainty. 

Even though Realtor.com is forecasting higher housing prices next year, the pace of escalation represents a slower rate than the blistering increases of the past two years. Prices will be elevated during the first half of 2023, but are likely to fall or stay flat during the second half of next year, Realtor.com’s Chief Economist Danielle Hale told CBS MoneyWatch.

“We expect, for the year as a whole, 2023 is going to be higher,” Hale said. “Shoppers who want to buy might have to wait a little bit.”

The elevated prices will be more dramatic in some cities than others, Realtor.com predicted. Metro areas that could see the sharpest increases are:

  • Worcester, Massachusetts: 10.6%
  • Portland, Maine: 10.3%
  • Grand Rapids, Michigan: 10%
  • Providence, Rhode Island: 9.8%
  • Spokane, Washington: 9.6%
  • Springfield, Massachusetts: 8.9%
  • Boise, Idaho: 8.7%
  • Chattanooga, Tennessee: 8.2%
  • Indianapolis, Indiana: 7.8%
  • Milwaukee, Wisconsin: 7.7%

Those higher prices could be discouraging for buyers who have already faced sharply higher real estate valuations in 2022. Some cities in particular — like Boise, Idaho; and Austin, Texas — saw double-digit percent increases this year. 

The rising cost of homeownership deterred many aspiring buyers, who have opted instead to continue renting. In a recent survey from LendingTree, nearly half of respondents said they were postponing major decisions, either renting for longer period of time or putting off major home renovations.

Home prices have fallen in some areas during the tail end of 2022, but mortgage rates have continued to climb. The average interest rate for a 30-year fixed mortgage was about 6.6% this week, more than double what the rate was at the start of the year. 

Realtor.com expects mortgage rates to climb even further at the beginning of next year as the Federal Reserve continues to raise its benchmark interest rate. Mortgage rates could reach as high as 7.4% in the first half of 2023 before settling down to around 7.1% toward the second half of the year, the company said.

The combination of higher home prices and mortgage rates in 2023 could push the typical monthly mortgage payment in 2023 to $2,430, or 28% higher than this year, Realtor.com predicted.


High mortgage rates drive down home sales

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Mortgage rates rose so quickly this year that it was at times difficult for buyers to figure out how much home they could afford, Hale said. In 2023, interest rates probably won’t fluctuate as much, she said. 

“Having more stability will make it easier for buyers when setting the right budget,” she said. “And that should help encourage people to get back into the housing market.”

With buyers sitting on the sidelines, the number of homes available for sale is expected to climb nearly 23% next year. The upside for buyers is a greater variety of choices, while sellers will be facing more competition. 

To be sure, all of these predictions could change depending how the Fed handles its fight against inflation next month and early next year, Hale said. The Fed has raised its benchmark rate six times this year, and with each hike mortgage rates have climbed as well. Hale and other economists expect the Fed to raise its rate again next month, but perhaps by not as much as previous increases. 

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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Business

Home prices are expected to keep rising next year: Here’s where

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Americans looking to buy a house next year can expect less competition, more homes to choose from and the highest average mortgage rates in nearly two decades. Here’s what they can’t expect: A widespread fall in prices that would bring relief to priced-out homebuyers.

That’s the major takeaway from Realtor.com’s 2023 Housing Forecast released Wednesday. Home price declines “may not happen as quickly as some have anticipated,” said Realtor.com’s chief economist, Danielle Hale. Prices will be elevated during the first half of 2023 and they’ll probably fall or stay flat during the second half of next year, she told CBS MoneyWatch. 

“We expect, for the year as a whole, 2023 is going to be higher,” Hale said. “Shoppers who want to buy might have to wait a little bit.”

The housing market will soon turn the page on 2022, a year that saw skyrocketing mortgage rates alongside soaring home prices. Some cities in particular — like Boise, Idaho; and Austin, Texas — saw double-digit percent increases in prices. The rising cost of homeownership deterred many aspiring buyers, who have opted instead to continue renting.  

Home prices have fallen in many areas during the tail end of 2022, but mortgage rates have continued to climb. The average interest rate for a 30-year fixed mortgage was about 6.6% this week, more than double what the rate was at the start of the year. 


High mortgage rates drive down home sales

02:09

Realtor.com expects mortgage rates to climb even further at the beginning of next year as the Federal Reserve continues to raise its benchmark interest rate. Mortgage rates could reach as high as 7.4% in the first half of 2023 before settling down to around 7.1% toward the second half of the year, the company said. When considering increases in property prices and loan rates, the typical monthly mortgage payment next year will be around $2,430, 28% higher than this year, Realtor.com predicted.

The rapid price run-up has stymied many would-be buyers. In a recent survey from LendingTree, nearly half of respondents said they were postponing major decisions, either renting for longer period of time or putting off major home renovations.

Mortgage rates grew so fast this year that they made it difficult for buyers to figure out how much home they could afford, Hale said. In 2023, interest rates probably won’t fluctuate as much, she said. 

“Having more stability will make it easier for buyers when setting the right budget,” she said. “And that should help encourage people to get back into the housing market.”


30-year fixed-rate mortgage average reaches highest level since 2001

03:05

Largest metropolitan areas

Home prices will likely increase in the nation’s 100 largest metropolitan areas, Realtor.com’s report said. Expect 10% hikes in Grand Rapids, Michigan; Portland, Maine; Providence, Rhode Island; Spokane, Washington and Worcester, Massachusetts.

Higher prices will likely keep away many potential homebuyers, causing rent prices to jump 6.3% and the number of homes sold to decline by 14%, Realtor.com said. However, housing inventory — the number of homes available for sale — is expected to climb nearly 23% next year, potentially giving a wider variety of dwellings to choose from to those who can afford to buy.

To be sure, all of these predictions could change depending how the Federal Reserve handles its fight against inflation next month and early next year, Hale said. The Fed has raised its benchmark rate six times this year, and, with each hike, mortgage rates have climbed as well. Hale and other economists expect the Fed to raise its rate again next month, but perhaps by not as much as previous increases. 

“The housing market has borne the brunt of the Fed’s attempt to control inflation,” Sean Black, CEO of mortgage lender Knock, said in his company’s 2023 housing prediction. “Sellers still hold the advantage in a majority of the nation’s largest metros, and many will continue to favor sellers well into 2023.”

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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Business

Mortgage rates fall for the second week in a row

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Mortgage rates dropped again this week, after plunging nearly half a percentage point last week.

The 30-year fixed-rate mortgage averaged 6.58% in the week ending November 23, down from 6.61% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.10%.

Mortgage rates have risen throughout most of 2022, spurred by the Federal Reserve’s unprecedented campaign of hiking interest rates in order to tame soaring inflation. But last week, rates tumbled amid reports that indicated inflation may have finally reached its peak.

“This volatility is making it difficult for potential homebuyers to know when to get into the market, and that is reflected in the latest data which shows existing home sales slowing across all price points,” said Sam Khater, Freddie Mac’s chief economist.

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who put 20% down and have excellent credit. But many buyers who put down less money upfront or have less than perfect credit will pay more than the average rate.

The average weekly rates, typically released by Freddie Mac on Thursday, are being released a day early due to the Thanksgiving holiday.

Mortgage rates tend to track the yield on 10-year US Treasury bonds. As investors see or anticipate rate hikes, they make moves which send yields higher and mortgage rates rise.

The 10-year Treasury has been hovering in a lower range of 3.7% to 3.85% since a pair of inflation reports indicating prices rose at a slower pace than expected in October were released almost two weeks ago. That has led to a big reset in investors’ expectations about future interest rate hikes, said Danielle Hale, Realtor.com’s chief economist. Prior to that, the 10-year Treasury had risen above 4.2%.

However, the market may be a bit too quick to celebrate the improvement in inflation, she said.

At the Fed’s November meeting, chairman Jerome Powell pointed to the need for ongoing rate hikes to tame inflation.

“This could mean that mortgage rates may climb again, and that risk goes up if next month’s inflation reading comes in on the higher side,” Hale said.

While it’s difficult to time the market in order to get a low mortgage rate, plenty of would-be homebuyers are seeing a window of opportunity.

“Following generally higher mortgage rates throughout the course of 2022, the recent swing in buyers’ favor is welcome and could save the buyer of a median-priced home more than $100 per month relative to what they would have paid when rates were above 7% just two weeks ago,” said Hale.

As a result of the drop in mortgage rates, both purchase and refinance applications picked up slightly last week. But refinance activity is still more than 80% below last year’s pace when rates were around 3%, according to the Mortgage Bankers Association weekly report.

However, with week-to-week swings in mortgage rates averaging nearly three times those seen in a typical year and home prices still historically high, many potential shoppers have pulled back, said Hale.

“A long-term housing shortage is keeping home prices high, even as the number of homes on the market for sale has increased, and buyers and sellers may find it more challenging to align expectations on price,” she said.

In a separate report released Wednesday, the US Department of Housing and Urban Development and the US Census Bureau reported that new home sales jumped in October, rising 7.5% from September, but were down 5.8% from a year ago.

While that was higher than predicted and bucked a trend of recently falling sales, it’s still below a year ago. Home building has been historically low for a decade and builders have been pulling back as the housing market shows signs of slowing.

“New home sales beat expectations, but a reversal of the general downward trend is doubtful for now given high mortgage rates and builder pessimism,” said Robert Frick, corporate economist at Navy Federal Credit Union.

Despite a general trend of falling sales, prices of new homes remain at record highs.

The median price for a newly constructed home was $493,000 up 15%, from a year ago – the highest price on record.

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Business

Home sales drop for 9th month

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Home sales in the United States declined for the ninth month in a row in October as surging mortgage rates and high prices pushed buyers out of the market.

Sales of existing homes — which include single-family homes, townhomes, condominiums and co-ops — were down 28.4% in October from a year ago and down 5.9% from September, according to a National Association of Realtors report released Friday. All regions of the United States saw month-over-month and year-over-year declines.

That continues a slowing trend that began in February and marks the longest streak of declining sales on record, going back to 1999.

Sales in October were at their weakest level since May 2020, when the real estate market was at a standstill during the pandemic lockdowns. Beyond that, sales last month were the weakest they have been since December 2011.

Still, home prices continued to climb last month. The median home price was $379,100 in October, up 6.6% from one year ago, according to the report. But that’s down from the record high of $413,800 in June. The price increase marks more than a decade of year-over-year monthly gains.

“More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher,” said Lawrence Yun, NAR’s chief economist. “The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years.”

Many homeowners who recently bought or refinanced into ultra-low mortgage rates are reluctant to sell. That has kept inventory painfully low.

At the end of October there were 1.22 million units for sale, down less than 1% from both last month and last year, according to the report. At the current sales pace, it would take 3.3 months to get through the existing inventory, up from 3.1 months in September and 2.4 months last year. But that’s still historically low: A balanced market is a 4 to 6 month supply.

“Inventory levels are still tight, which is why some homes for sale are still receiving multiple offers,” Yun added.

While nearly a quarter of homes in October sold over the asking price, homes sitting on the market for more than 120 days saw prices reduced by about 16%.

With fewer buyers shopping for homes, the average time a home stays on the market is getting longer.

Properties were typically on the market for 21 days in October, up from 19 days in September. Pre-pandemic, homes typically sat on the market closer to 30 days. Over half the homes sold in October were on the market for less than a month.

While prices are still climbing year over year nationally, the increase is smaller than it has been over the past couple years with annual home price appreciation peaking at 24% in May 2021.

And some markets are even seeing prices drop, especially areas that saw a huge increase in home price appreciation during the pandemic, Yun said.

Half the country can expect to see prices decline year over year in the months ahead, Yun said, most will be by a modest amount, while other areas will see bigger drops. But the other half will likely see a modest increase.

“Affordable areas will hold on, places like Indianapolis, where there is job growth,” he said.

Still, Yun said, nationally, home prices are 40% higher than in October 2019, prior to the pandemic.

“Household incomes have not risen by 40%,” he said.

Those struggling to buy their first home continued to be shut out, making up only 28% of transactions last month.

“First-time buyers are really struggling with high prices, the high bar to get into the market and high mortgage rates.”

Once the hurdle to homeownership improves a bit for buyers — either with falling prices or lower mortgage rates — we could again face a housing shortage, Yun said, because the number of fresh listings coming to market is lower now than a year ago.

Current homeowners aren’t selling and homebuilders are slowing home construction, too.

October housing starts, a measure of new home construction, dropped 4.2% from September, and were down 8.8% from a year ago, according to the US Census Bureau and the US Department of Housing and Urban Development.

“This is why more new home construction is needed, as well as more rehabilitation of disused buildings into residential units,” said Yun, noting that while construction of apartment buildings remains robust, single-family starts are below one year ago and well below historical averages.

“In the meantime, mortgage rates are falling from the peak levels of last month and the gate is opening for more homebuyers to qualify for a mortgage.”

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First-time homebuyers are being shut out of the market like never before

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If you bought your first home during the past year, consider yourself one of the fortunate few.

Skyrocketing home prices and climbing interest rates pushed the share of first-time homebuyers to an all-time low, according to a new report from the National Association of Realtors. And those first-time buyers were the oldest they have ever been, as the growing lack of affordability forced people to wait longer to reach life milestones like buying a home.

First-time buyers made up just 26% of all homebuyers in the year ending June 2022, down from 34% the year before, according to NAR’s 2022 report on homebuyers and sellers. That was the lowest in the survey’s 41-year history. The share of buyers purchasing a first home has sat between 30% and 40% over the past decade and reached as high as 50% in 2009.

The age of a first-time homebuyer also rose, with the typical age reaching 36 years old, up from 33 last year. The typical repeat buyer’s age also climbed, reaching 59 years old, up from 56. Both are all-time highs.

As home prices soared and mortgage rates rose, buyers’ income dropped, the report found.

The median household income for first-time buyers slipped to $71,000 during the year ended in June, down from $86,500 in the previous 12-month period. Meanwhile, repeat buyers had a median income of $96,000, down from $112,500 the previous year.

Buyers typically purchased their homes for 100% of the asking price, the research showed, with 28% paying more than the asking price.

“For first-time homebuyers, the lack of affordability is playing a key role in holding them back from homeownership,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “They don’t have the equity that repeat buyers have for a down payment or to buy in cash. They have to save while paying more for rent, as well as student debt, child care and other expenses, and this year were facing increasing home prices while mortgage rates are also climbing.”

The time period covered by the research, from July 2021 to June 2022, included some of the steepest home price increases, reaching a peak median home price of $413,800 this past June. Inventory, hampered by decades of underbuilding, was at record low levels, which kept the competition to buy a home frenzied and pushed prices higher. By April of this year, mortgage rates began to surge past the 5% mark. But, after the Fed embarked on a series of interest rate hikes in order to tame inflation, they climbed to as high as 7% by late October. On Thursday, mortgage rates dipped slightly to 6.95%.

Together these factors have made for one of the most challenging and least affordable housing markets in decades.

Economists and housing advocates have cautioned that the increasingly unaffordable housing market is locking many potential buyers, especially buyers of color, out of homeownership.

The research showed there were fewer Black and Asian homebuyers during the year studied, while the share of White and Hispanic buyers grew.

During the year ending in June, the overwhelming majority of buyers, 88%, were White, up from 82% the previous year. Of all home buyers, 8% were Hispanic, up from 7%. Meanwhile, 3% were Black and 2% were Asian, both dropping from 6% a year ago.

This is likely to exacerbate the racial homeownership gap, in which 72% of White Americans are homeowners while only 43% of Black Americans own a home, according to NAR.

“We have been talking about the impacts, but this year we are seeing it realized in the data,” said Lautz. “Unless we have substantial homebuilding at affordable prices, we will continue to see first-time homebuyers held back.”

Lautz said that prior NAR research has shown that would-be Black homebuyers have lower incomes, higher debt and less likelihood of family support for a down payment than other groups. The data also showed that Black renters are also more squeezed, with a larger share paying more than 30% of their income to their landlord.

“With the rise of rents and how that is hitting first-time homebuyers, it impacts Black buyers more than it would any other group,” said Lautz.

Because of the affordability crunch, homebuyers seemed less able or interested in buying in the area where they currently live. The median distance between a buyer’s current home and their newly purchased home was typically 15 miles between 2018 and 2021. The typical distance during the year ending in June 2022 was 50 miles.

Lautz said the research showed buyers faced hard decisions to close the deal on a home they could afford.

The typical home purchased was 1,800 square feet, had three bedrooms and two bathrooms, and was built in 1986, the NAR report found. That is a smaller and older home than in previous years.

“For a lot of people something had to give in the equation: their location, the condition of the home or its size,” said Lautz.

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Home prices are finally falling. But how low will they go?

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The US housing market is in the midst of a major shift. After two years of stratospheric price appreciation, home prices have peaked and are on their way back down.

But what homebuyers and homeowners alike want to know is: How much lower will prices go?

The short answer: Prices are likely to drop further, but not by as much as they did during the housing bust. From the 2006 peak to the 2012 trough, national home prices fell by 27%, according to S&P CoreLogic Case-Shiller Indices, which measures US home prices.

“It was different in 2008, 2009 because that drop in prices was because of a push from sellers,” said Jeff Tucker, senior economist at Zillow. “Because of foreclosures and short sales there were a lot of extremely motivated sellers who were willing to take a loss on their homes.”

Plus, that housing crash came at a time when the inventory of homes for sale was four times higher than it is now. Current inventory is still substantially lower than pre-pandemic levels, which has increased competition for homes. And that is keeping prices relatively strong.

“I would be surprised to see prices anywhere drop below where they were in 2019,” said Tucker. “There was some overheating in the housing market in 2021 through this spring that pushed prices higher than what the fundamentals would support. Now they are coming down.”

With mortgage rates more than doubling since the start of this year, the calculations for a homebuyer have changed considerably. The monthly principal and interest mortgage payment on the median priced home is up $930 from a year ago, a 73% increase, according to Black Knight, a mortgage data company.

When you factor in soaring mortgage rates, along with elevated home prices and wages that aren’t increasing as fast, buying a home is less affordable now than it has been in decades, according to Black Knight.

But there may be some relief in sight for buyers.

Economists at Goldman Sachs expect home prices to decline by around 5% to 10% from the peak hit in June.

Wells Fargo has recently forecasted that national median single-family home prices will drop by 5.5% year-over-year by the end of 2023.

Wells Fargo’s economists estimate that the median price for an existing single family home to be $385,000 this year, up 7.8% from last year, but the growth will be a lot less than the 19% year-over-year increase seen in 2021.

The economists anticipate the median home price will fall to $364,000, a decline of 5.5% from this year. They predict prices will rebound and rise again in 2024, with the median price ticking up 3.3% to 376,000 by the end of 2024.

“The primary driver behind the housing market correction thus far has been sharply higher mortgage rates,” the Wells Fargo researchers wrote. “If our forecast for Fed rate cuts is realized, mortgage rates are likely to fall slightly just as cooling inflation pressures boost real income growth. A modest improvement in sales activity should then follow, which will reignite home price appreciation heading into 2024.”

Ultimately, how much prices fall will depend on where you live.

Unlike the run-up in prices during the pandemic that caused home values in markets across the country to surge, the cooling off will be more regional, said Tucker. The drops will be more deeply felt in places where there were larger gains during the pandemic, many of them in the West and Sunbelt, including cities like Austin, Phoenix and Boise, he said.

“Nationally, we might see a 5% decline from the peak,” Tucker said. “But prices will decline by more in the West and there will be a smaller decline in the Southeast.”

In September, month-over-month home prices dropped in several pandemic hotspots, including Phoenix, down 2.3%; Las Vegas, down 1.9% and Austin, down nearly 1%, according to Zillow.

And Boise, Idaho, where prices surged nearly 60% during the pandemic, is already seeing annual declines, with prices falling 3.9% year over year in September, according to Zillow.

“A number of metro areas, especially in the West, will see some year-over-year price declines this spring,” said Tucker. “That will be the worst comparison time because that’s when many markets reached their peak.”

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Where home prices in 2023 are headed in your local housing market, according to Zillow’s revised forecast

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Of course, just weeks later, the Pandemic Housing Boom began to fizzle out. Each forecast since, Zillow slashed its 12-month home price outlook. In April, Zillow revised it down to 14.9%. In May, it was revised down to 11.6%. In July, it was revised down to 7.8%. In August, it was revised down to 2.4%. In September, it was revised down to 1.2%.

However, this week Zillow finally stopped revising its 12-month outlook downward. Over the coming 12 months, Zillow now expects U.S. home values to rise 1.4%.

Whenever a firm like Zillow says the “U.S. housing market” or “U.S. home prices,” it’s talking about an aggregated view of the country. In each regional housing market—heck, in each neighborhood—the results could vary significantly. To better understand Zillow’s forecast, let’s dig into the data for regional housing markets. We’ll start by looking at what happened to home values this summer, and then we’ll dig into Zillow’s regional forecasts.

Back in May, Moody’s Analytics chief economist Mark Zandi told Fortune that rising mortgage rates coupled with “overvalued” home prices would push the U.S. housing market into a housing correction. A housing correction being a period where the U.S. housing market—which got priced to 3% mortgage rates—would work towards equilibrium. In every market, that’d translate into a sharp decline in home sales. It’d also, Zandi said, put frothy markets at risk of home price corrections.

That’s exactly what we saw this summer: Home sales plummeted across the nation, and frothy markets in the Western half of the country also saw declining home prices.

According to Zillow, 117 regional markets (see chart above) saw a decline in home values between May and August. Of those, 36 markets saw a decline greater than 3%. For the most part, these markets fell into one of two camps. Either they’re frothy boomtowns—like Austin (down 7.4%) and Boise (down 5.3%)—or they’re high-cost tech hubs. Frothy markets simply saw home values become detached from local fundamentals. Markets like Seattle (down 3.8%) and San Francisco (down 7.8%) are particularly rate sensitive. Not only do spiked interest rates deter buyers from high-end homes in San Francisco and Seattle, but they also have an acute impact on tech sector employment.

“Across the country, affordability challenges have pushed potential buyers to the sidelines. Of course, this demand destruction has been more pronounced in some markets than in others. Markets with the highest prices a year ago saw disproportionately larger declines in active demand in the 12 months that followed,” write Zillow researchers.

While 117 markets saw falling home values this summer, another 779 markets saw rising home values. In East Coast markets like Miami (up 4.1%) and Myrtle Beach, S.C. (up 4.5%), those gains were fairly strong. Simply put: This isn’t a one-size-fits-all slowdown.

Through the final three months of 2022, Zillow expects the home price correction to continue in Western housing markets, albeit at a milder pace. Between May and August, markets like Phoenix and Salt Lake City saw home values fall 4.4% and 7.1%, respectively. Between the end of September and the end of December (see chart above), Zillow expects home values to fall by 2% in Phoenix and remain flat in Salt Lake City.

In total, Zillow expects home values to fall in 118 regional markets in the final three months of 2022. It expects 747 markets to post rising home values and 29 markets to remain flat.

Heading into 2023, Zillow predicts the home price correction will lose steam in some markets while it picks up steam in other places.

In markets like Boise and Phoenix, which saw sharp home price corrections this summer, Zillow expects prices to rebound a bit in 2023: Over the coming 12 months, Zillow expects home values to rise 4.3% in Boise and 1.7% in Phoenix.

Nationally, Zillow expects 271 markets to post falling home values between September 2022 and September 2023—while 607 markets post rising home values, and 19 markets remain flat.

Why does Zillow think the home price correction won’t go national? It boils down to tight supply.

“A pullback in demand has pushed prices downward, but while the housing market isn’t nearly as tight as it was earlier, a lack of for-sale listings is providing some support for prices against further declines,” write Zillow researchers. “Active for-sale inventory rose steadily through the spring and summer but still sits nearly 40% below pre-pandemic levels.”

Spiked mortgage rates have not only translated into fewer homebuyers, it’s also sidelined some sellers. Some sellers refuse to lower their price point. While others aren’t eager to give up their 2% or 3% fixed mortgage rate. Industry insiders are calling the phenomenon the “lock-in effect.”

“This dynamic is unlike previous housing market slowdowns that led to price declines, and persistent tight supply could insulate the market from a significant price correction, even as demand has fallen off. For instance, in the Great Recession home value declines were accompanied/prompted by an increase in new listings, including many distressed sales,” write Zillow researchers.

Let’s be clear: Zillow remains on the optimistic side.

A growing chorus of research firms and banks are predicting the sharpest home price declines still await. That includes firms like Goldman Sachs, Wells Fargo, Morgan Stanley, Moody’s Analytics, Capital Economics, Zonda, Zelman & Associates, Fannie Mae, and John Burns Real Estate Consulting.

“The longer that [mortgage] rates stay elevated, our view is that housing is going to continue to feel it and have this reset mode. And the affordability resetting mechanism right now that has to happen is on [home] prices. And so there are a lot of markets across the country where we’re forecasting that home prices are going to fall double digits,” Rick Palacios Jr., head of research at John Burns Real Estate Consulting, tells Fortune.

Only CoreLogic and the Mortgage Bankers Association agree with Zillow that we won’t see a year-over-year decline in U.S. home prices in 2023.

Want to stay updated on the U.S. housing market? Follow me on Twitter at @NewsLambert.

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The home price correction intensifies—what to expect from the U.S. housing market in 2023

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That, of course, is what we’re seeing now. Despite favorable demographics and tight inventory levels, pressured affordability—spiked mortgage rates coupled with frothy home prices—is beginning to push home prices lower. In fact, this week we learned that U.S. home prices as measured by the Case-Shiller U.S. National Home Price Index posted its first month-over-month decline since 2012.

Across the country, the U.S. housing market—which got priced to 3% mortgage rates during the Pandemic Housing Boom—is working toward equilibrium in the face of 6% mortgage rates. But we’re still in the early innings. And the ongoing home price correction still hasn’t hit every market: Between May and August, home values in San Jose fell 10.6% while home values grew 2% in Orlando.

To better understand where the U.S. housing downturn heads next—and if the home price correction will soon hit more markets—Fortune reached out to Zonda chief economist Ali Wolf. When she’s not traveling around the country speaking to homebuilders, she’s advising the White House on housing matters.

Below is Fortune‘s Q&A with Ali Wolf.

Fortune: As the data rolls in, it’s pretty clear that home prices are falling in many markets across the country. In some places it’s fairly sharp. Do you expect home price declines to continue into 2023?

Wolf: We haven’t seen home prices drop universally across the country, but there are some markets where home prices have started to come down and we expect to see that in more metros across the country in the next handful of months. Corrections in home prices can be expected in 2023 as long as interest rates remain elevated and consumer demand remains slow.

What types of markets are the most vulnerable? 

The markets that are the most vulnerable include: 1) Those where home prices rose sharply because of hybrid work, like Boise, Las Vegas, and Denver. 2) Markets that don’t have a local employment base to support the higher home prices (put another way, markets where home prices and incomes are out of whack), like Nashville and parts of Florida. 3) Markets where housing inventory has risen rapidly, like Phoenix and Austin.

Why are markets like Austin, Boise, and Phoenix shifting so fast? 

The housing booms seen in markets like Austin, Boise, and Phoenix were among the earliest in the nation and the sharpest. The record-low mortgage interest rates combined with lifestyle changes brought on by the pandemic, including work from home and increased relocations, drove a dramatic uptick in housing demand and supply could not keep pace.

Those relocating from places like California and Washington were able to tap home equity from a sale in the higher cost market and put those funds towards buying a new home in these relatively more affordable markets. Relocation buyers found these markets very affordable compared to where they were moving from at the detriment of local buyers.

There was a belief in these markets that the supply and demand imbalance was so severe and so long standing that the markets could never get overheated. Buyers, frantic to secure a home, were willing to pay almost any price to secure a home. Investors and flippers considered these markets ripe for opportunities. This mentality contributed to the massive run-up in home prices.

As interest rates rose in early 2022, however, reality started to kick in. Home price appreciation was slowing and not every home that was listed was selling for above the list price within a day of coming online. The demand for housing slowed just as some of the new homes under construction started coming online and existing home inventory rapidly increased as sellers tried to time what they believed to be the top of the market. 

How do you expect mortgage rates near 7% to impact the housing market? We were already correcting with 5% mortgage rates. Should we expect things to intensify with 6.5%-7% rates?

Housing affordability is driven by many factors, but the two key inputs are home prices and mortgage rates. We just lived through a unique period in American history where rising home prices were offset by record-low interest rates. The cheap financing helped keep the monthly mortgage payment in check.

Interest rates have risen dramatically since the start of the year, though, putting a strain on housing affordability. Buyers were already starting to get priced out of the market when interest rates moved from 3% to 4% and every 100-basis point increase has continued to price millions of Americans out of homeownership.

If mortgage rates remain elevated for an extended period, we expect that housing demand will remain soft, new home construction will be restricted, and home prices will need to adjust downward across the country.

Want to stay updated on the housing correction? Follow me on Twitter at @NewsLambert.



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These are the 10 states with America’s most stable housing markets

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The three most important things in real estate: location, location, location. And the U.S. real estate market is in a weird place right now.

Mortgage rates are nearly double what they were a year ago, reflecting the Federal Reserve’s campaign to rein in inflation. But they have also been volatile, including some sharp declines from week to week.

Home prices remain stuck at historic highs with bidding wars reported in some places, even as the inventory of homes for sale begins to grow and housing markets across the country, including some of the biggest in the states below, begin to cool.

Where is everything heading? Realtor.com recently revised its 2022 forecast, now calling for sales to decline by 6.7% this year. Forecasters previously called for a 6.6% increase. But even if the new forecast holds true, it would still be the second biggest sales year since 2007, only trailing last year.

As always, some states will fare better than others. Because companies consider the local housing market in their location decisions, CNBC’s America’s Top States for Business study gauges the health of each state’s housing market as part of the broader Economy category, which is worth 13% of a state’s overall score under this year’s methodology. The housing metric considers year-over-year price appreciation, new construction per year, as well as foreclosures and insolvency in the first quarter. 

Looking for a safe place to ride out a potential housing storm? These ten states are the most stable.

10. South Dakota

Deadwood, South Dakota

John Elk | The Image Bank | Getty Images

A solid economy in the Mount Rushmore State has prices rising steadily. Foreclosure activity is very low, but a rising level of underwater mortgages could foreshadow some cracks below the surface.

2022 Economy Rank: No. 12 (Top States Grade: B-)

Appreciation: 20.1%

Starts per 1,000 population: 8.8

Foreclosure rate: 1 in 17,724 housing units

Underwater mortgages: 4.8%

9. South Carolina

Contractors work on the roof of a house under construction in the Stillpointe subdivision in Sumter, South Carolina, on Tuesday, July 6, 2021.

Micah Green | Bloomberg | Getty Images

Inventory is still historically tight with bidding wars still common in many South Carolina markets, and prices still steadily increasing. But new construction is surging and stress on existing loans is under control.

2022 Economy Rank: No. 13 (tie) (Top States Grade: B-)

Appreciation: 21.4%

Starts per 1,000 population: 9.5

Foreclosure rate: 1 in 1,081 housing units

Underwater mortgages: 3.4%

8. Arizona

A worker builds a new home at a housing development in Phoenix, Arizona.

Justin Sullivan | Getty Images

Prices are surging here more than any other state. But new construction is booming too, helping to ease Arizona’s inventory crunch. Rising foreclosures are a potential cause for concern, but home equity is solid.

2022 Economy Rank: No. 22 (tie) (Top States Grade: C-)

Appreciation: 27.4%

Starts per 1,000 population: 9

Foreclosure rate: 1 in 1,861 housing units

Underwater mortgages: 1.4%

7. Vermont

A traditional house in Vermont.

Gerard Sioen | Getty Images

The Green Mountain State continues to benefit from new residents seeking refuge from the big cities. Home prices are rising at healthy clip, and mortgages are beyond healthy. New construction, however, is not keeping pace, and the overall economy in Vermont is sluggish.

2022 Economy Rank: No. 33 (Top States Grade: D+)

Appreciation: 20%

Starts per 1,000 population: 3.2

Foreclosure rate: 1 in 13,930 housing units

Underwater mortgages: 1.1%

6. Tennessee

A house in Nashville, Tennessee.

Isabella Pino | Universal Images Group | Getty Images

Tennessee has the second strongest overall economy in the nation, and its strong and stable housing market is a big reason why. Home prices are surging along with economic output. New construction is healthy, though foreclosures and underwater mortgages are starting to creep up.

2022 Economy Rank: No. 2 (Top States Grade: A+)

Appreciation: 24.1%

Starts per 1,000 population: 8.2

Foreclosure rate: 1 in 2,797 housing units

Underwater mortgages: 2.9%

5. Idaho

A ‘New Homes’ sign near the CBH Homes Copper River Basin Community in Nampa, Idaho, Oct. 19, 2021.

Kyle Green | Bloomberg | Getty Images

Idaho’s housing market has been going gangbusters for some time now. Buying a home in the Gem State is not for the faint of heart. But new construction is slowly starting to relieve the inventory squeeze. Rising foreclosure are a potential warning sign if the economy tips into a recession.

2022 Economy Rank: No. 5 (Top States Grade: A)

Appreciation: 27%

Starts per 1,000 population: 10.5

Foreclosure rate: 1 in 6,015 housing units

Underwater mortgages: 1.6%

4. Texas

A residential neighborhood in Austin, Texas, on Sunday, May 22, 2022.

Jordan Vonderhaar | Bloomberg | Getty Images

Texas’ population gains are helping fuel a housing boom, but one that is not getting out of hand. New homes for those new residents are springing up fast, and home equity is good.

2022 Economy Rank: No. 8 (Top States Grade: A-)

Appreciation: 19.3%

Starts per 1,000 population: 8.9

Foreclosure rate: 1 in 2,326 housing units

Underwater mortgages: 2.5%

3. Florida

Single family home available sign in St. Cloud, Florida.

Jeff Greenberg | Universal Images Group | Getty Images

It’s almost all sunshine and light in Florida’s housing market. Prices are jumping, but so are construction crews. Rising foreclosure rates in a state known for its boom-and-bust cycles could be a cloud on the horizon.

2022 Economy Rank: No. 4 (Top States Grade: A)

Appreciation: 25.7%

Starts per 1,000 population: 9.6

Foreclosure rate: 1 in 1,211 housing units

Underwater mortgages: 1.4%

2. Washington

A “For Sale” sign is posted outside a residential home in the Queen Anne neighborhood of Seattle, Washington, May 14, 2021.

Karen Ducey | Reuters

Washington’s impressive run of economic growth has kept its housing market among the hottest in the nation for several years now, defying predictions of a crash. A shortage of new construction is probably keeping prices high, and raising continued concerns about how stable the market is.

2022 Economy Rank: No. 3 (Top States Grade: A)

Appreciation: 20.1%

Starts per 1,000 population: 7.3

Foreclosure rate: 1 in 4,965 housing units

Underwater mortgages: 1.2%

1. Utah

A worker uses a Volvo AB excavator to build a road during residential construction in Saratoga Springs, Utah.

George Frey | Bloomberg | Getty Images

No matter how you look at it, the housing market in the Beehive State is buzzing. Prices are rising at the second highest rate in the country, but with the nation’s fastest pace of new construction, plenty of new inventory is on the way in Utah. Foreclosures are manageable and home equity is strong in the top housing market in the nation.

2022 Economy Rank: No. 6 (Top States Grade: A)

Appreciation: 27.1%

Starts per 1,000 population: 12.2

Foreclosure rate: 1 in 2,063 housing units

Underwater mortgages: 1.4%

Data Sources: CNBC America’s Top States for Business study, Federal Housing Finance Agency, U.S. Census Bureau, ATTOM Data Solutions.

 

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San Diego Home Prices Surging Once Again – NBC 7 San Diego

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U.S. home prices jumped in August by a near-record amount from a year earlier, as Americans eager to buy a home drove up prices on a dwindling number of properties.

The S&P CoreLogic Case-Shiller 20-city home price index soared 19.7% in August compared with a year ago. That increase is just below July’s 20% jump, which was the largest gain on records dating back to 2000. Home prices are now at all-time highs in all 20 cities in the index.

As many struggle to find affordable housing, NBC 7’s Artie Ojeda shows how some people are making a giant decision to move into a tiny living space.

Phoenix reported the biggest price increase among the 20 cities that make up the index, as it has for more than two years. Its home prices increased 33.3% in August compared with a year earlier. Home prices in San Diego jumped 26.2%, the second highest, and Tampa’s home prices rose 25.9%, the third-largest gain.

Home sales have been healthy for most of this year, spurred by an ongoing desire among many people for greater space to wait out the coronavirus pandemic. Mortgage rates have also been historically low, though they have risen in recent weeks, and many Americans have become wealthier since the pandemic as stock prices have moved steadily higher, enabling them to afford a new home.

There are signs that the rapid price gains of the past year are cooling a bit. August’s price increases, compared with a year ago, were slightly lower than in July, the first decline in annual price gains since June 2020. And price increases slowed in 12 of the 20 cities in the Case-Shiller CoreLogic index.

“The slowing acceleration in home prices suggests that buyer fatigue is setting in, particularly among higher-priced homes,” said Selma Hepp, CoreLogic Deputy Chief Economist.

Mortgage rates rose to 3.1% last week, the highest since April, according to mortgage-buyer Freddie Mac.

That increase likely pushed more people to look for and buy homes, before rates move even higher. Sales of existing homes jumped 7% in September.

Potential buyers still have relatively few homes to choose from, with just 1.27 million houses on the market in September, down 13% in the past year. That’s pushed many buyers to move quickly.

Homes are typically selling within 17 days of hitting the market, according to the National Association of Realtors, and 86% of homes sold in September were on the market for fewer than 30 days.

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