Redfin: These housing markets have the highest risk of falling home prices

Homebuyers have had enough. Mortgage rates soar on top of record house price increases—up 42% since the pandemic broke out—Push monthly mortgage payments to a level where tens of millions of people would be buyers unattainable. When many buyers check, The housing market corrects only became more intense.

This week, we learned that on a yearly basis, Mortgage orders down 18%. While New home sales down 17%and Single-family housing starts to fall 16%.

Even when real estate transactions plummetedwe are not back to the equilibrium market yet. Inventory level is still an amazing 49% below July 2019 levels, giving most sellers — at least for now — enough leverage to keep selling below the market price hit earlier this year. That said, as inventory levels continue to rise, it’s possible that some housing markets in the region could actually see a year-over-year decline in home prices in 2023.

On Friday, Redfin released a “risk score,” which identifies the housing markets most at risk of a “housing downturn.” The higher a market’s “risk score,” the more likely it is that the market could see a year-over-year decline in home prices. In total, Redfin looked at 98 housing markets in the region and assessed factors including home price volatility, debt-to-average income and home price growth.

Of the 98 markets measured by Redfin, Riverside has the highest likelihood of a “housing recession”. This is followed by Boise, Cape Coral, North Port, Las Vegas, Sacramento, Bakersfield, Phoenix, Tampa and Tucson.

Famous Migration destinations where home prices skyrocketed during the pandemic — including Boise, Phoenix and Tampa — will most likely see the impact of the housing downturn amplified and house prices fall year-over-year if the economy goes into recession, a scenario that some economists believe looks like inflation will continue and the stock market plunges. Homeowners in areas that are considering selling their home may want to list their home early to avoid potential price drops,” Redfin researchers write.

Sellers least likely to see a price drop? Redfin said Akron. Not too far behind it are markets like Philadelphia, El Paso, Cleveland and Cincinnati. Like housing boom pandemic has taken off, homeowners in those places see less investor activity and more modest home price gains. Amid the boom, homeowners in places like Akron have certainly suffered from FOMO as they watched their peers in Austin and Boise experience exorbitant home price increases. But now homeowners in markets like Akron and Cleveland can be grateful: The most obvious home repairs often come in the fastest growing markets.

“The major cities in the north are relatively affordable—some are on the Rust Belt, such as Cleveland and Buffalo—have the best resilience in the event of a recession. Potential homebuyers. in those areas can move forward with the belief that they are less likely to see home values ​​decline,” Redfin researchers write.

Each quarter, Moody’s Analytics calculates an “overvalued” or “undervalued” number for approximately 400 markets. The company aims to find out whether fundamentals, including local income levels, can support local home prices. It is only worrisome when the housing market is significantly “overvalued”. The bad news? In the first quarter of 2006, the average US housing market was “overvalued” by 14.5%. In the first quarter of 2022, Moody’s estimates the average regional housing market is “overvalued” 23%.

Simply decoupling from economic fundamentals does not guarantee that a market will see house prices plummet. However, when a market becomes “overvalued,” it increases the odds of falling home prices if both a housing adjustment and recession occur. Moody’s Chief economist Mark Zandi told Luck that the housing market is “overvalued” more than 25% likely see house prices fall by 5% to 10%. If a recession occurs, discounts can be up to 15% to 20% in those markets.

Currently, we are seeing “vibrant” markets like Boise and Austin seeing the fastest corrections. Just look at the inventory. Over the past six months, inventory levels have increased by 161% and 220%, respectively, in Boise and Austin.

Earlier this month, John Burns Real Estate Consulting told Luck that Boise poised to be the first housing market to quote annual price drops. The property research firm predicts it could come as early as December. For that to happen, house prices in Boise will not only have to erase all of the gains in the spring of 2022 but also have to drop. below December 2021 prices.

Rick Palacios Jr., head of research at John, “You could make a strong case that in many housing markets, the past 10 percent increase in home prices was entirely desirable and unreasonable. , and that will peak very quickly. Burns Real Estate Consulting “That’s exactly what we’re seeing right now.”

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