Homebuyers had had enough. Mortgage rates rise On top of rising standard house prices –42% since the onset of the epidemicMonthly mortgage payments made to a level simply inaccessible to tens of millions of potential buyers. With more buyers doing rain check, Housing Market Correction Only getting worse.
Even with lower housing transactionsWe still haven’t returned to a balanced market. Inventory levels remain a staggering 49% Below July 2019 levels, giving most sellers – at least for now – enough leverage to stop selling below market prices reached earlier this year. However, with stock levels continuing to rise, some regional housing markets are likely to see a year-on-year decline in house prices in 2023.
On Friday, Redfin released its “risk score”, which identifies the housing markets most at risk of a “housing downturn”. The higher the “risk score” in the market, the more likely the market will see a year after year decline in home prices. In all, Redfin looked at 98 regional housing markets and evaluated factors including home price volatility, average debt-to-income ratio and home price growth.
Of the 98 markets measured by Redfin, Riverside had the highest probability of seeing a “housing dip.” It was followed by Boise, Cape Coral, Northport, Las Vegas, Sacramento, Bakersfield, Phoenix, Tampa, and Tucson.
“plural Immigration destinations where home prices have risen during the pandemic – including Boise, Phoenix and Tampa – are likely to see the effects of housing deflation and plummeting home prices year after year if the economy enters a recession, a scenario that some economists believe appears likely as the continued Inflation and stock market faltering. Homeowners in those areas who are considering selling may want to list their homes soon to avoid potential price drops.” Redfin researchers write.
Sellers least likely to see prices go down? Radvin says Akron. Not far from markets like Philadelphia, El Paso, Cleveland and Cincinnati. Such as Pandemic housing boom It took off, and homeowners in those places saw less investor activity and more modest levels of home price growth. In the midst of the boom, homeowners in places like Akron certainly had FOMO as they watched their peers in Austin and Boise face exorbitant levels of home price growth. But now homeowners in markets like Akron and Cleveland are more likely to be grateful: Historically, The sharpest corrections in the housing sector usually come in the fastest growing markets.
“Relatively affordable Northern metros—many of which are in Rust Belt, such as Cleveland and Buffalo—are the most resilient in the slump. Potential homebuyers in these areas can proceed with confidence that they are less likely to see home values drop,” Redfin researchers write.
every quarter, Moody’s Analytics calculates an “overvalued” or “undervalued” number for approximately 400 markets. The company aims to see if the fundamentals, including local income levels, can support local home prices. It’s only annoying when the housing market becomes massively “overrated”. Bad news? In the first quarter of 2006, the average US housing market was “overvalued” at 14.5%. In the first quarter of 2022, Moody’s estimates the average regional housing market is ‘overdone’ at 23%.
Just being detached from the basic economic fundamentals does not guarantee that the market will experience a sharp decline in home prices. However, when the market becomes too “overvalued”, it increases the odds of lower house prices if both a housing correction and a recession occur. Moody’s Chief Economist Mark Zandi says: luck that housing markets “overvalued” by more than 25% are likely to do so See home prices fall between 5% and 10%. If recession occurs, Prices can be as low as 15%-20% in those markets.
Already, we’re seeing “bubbly” markets like Boise and Austin see the fastest corrections. Just look at the stock. Over the past six months, inventory levels are up 161% and 220% in Boise and Austin, respectively.
Earlier this month, John Burns Real Estate Consulting said luck who – which Boise is poised to be the first housing market to record year-on-year price drops. The real estate research firm predicts that it may come as soon as December. For that to happen, Boise home prices would not only have to erase all of their Spring 2022 gains, but would also drop below their December 2021 price.
“That’s exactly what we’re all seeing right now,” said Rick Palacios Jr., head of research at John Burns Real Estate Advisors.
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