According to a new report by property analytics data firm CoreLogic, home prices have fallen in a dozen states over the past year. In May 2023, annual home price growth crept up at its slowest pace in 11 years, with just a 1.4% increase from May 2022.
That’s a glimmer of hope for prospective home buyers slammed by high costs, even as mortgage rates continue to hover near 7%.
They wanted to seek housing assistance from friends and family, as they couldn’t afford it on their own due to low income. The demand for housing increased as newcomers arrived. Western states like Washington, Arizona, and Idaho experienced significant home price gains during the pandemic.
By the summer of 2020, as per the Federal Housing Finance Agency, there was a surge of over 16% in home prices in Boise, Idaho, compared to the previous year.
Many areas are currently experiencing wild price gains during the pandemic, where the levels in 2022 have fallen from the prices that were seen here.
Kristen D. Conti, the owner of Peacock Premier Properties, states that a decline in several Western markets has been caused by a mix of limited stock, elevated taxes, increasing mortgage rates, and a shifting job market.
According to Conti, “which already command exorbitant prices,” are among the primary culprits impacting these markets, alongside the volatility of technology stocks, workforce reductions in the technology industry, and rising interest rates.
In 2022, one of 18 states, California included, experienced a population decline of approximately 343,000 residents, as reported by the Census Bureau. This demographic shift could potentially contribute to the overall population changes.
Due to job cuts, prices also decreased, potentially in technology-focused cities such as Seattle and San Rafael, California. Idaho’s Boise and Coeur d’Alene, known as “Zoom towns” where individuals had relocated to enjoy a more affordable lifestyle while working from a distance, encompass the metropolitan regions with the most notable decline in prices compared to the previous year.
Where Home Prices Keep Rising
In the majority of the nation, though, prices are still increasing, escalating for the 136th month in a row.
Home values in Miami surpassed those in other metropolitan regions with an 11.8% year-over-year surge, establishing the Southeast as the frontrunner in terms of housing price expansion. Atlanta and Charlotte, located in North Carolina, experienced a yearly price rise of 4.4%, positioning them in the runner-up spot.
Maine claimed the leading position among states with a 7.2% surge in home prices, closely trailed by New Jersey (7.1%) and Indiana (6.9%).
Areas Anticipated to Experience a Decline in Home Prices
According to CoreLogic’s proprietary risk model, there is a strong likelihood that certain areas of the country will see a decline in home prices.
CoreLogic assigns a 70% chance to these regions experiencing a decline in housing prices within the upcoming year.
Limited Supply, Strong Demand Maintains Market as Expensive
The demand for homes still exceeds the supply in most countries, and this imbalance remains elevated. Additionally, home prices continue to rise, even with mortgage rates up 1.51% year-over-year.
Homes experiencing a shortage are not typically seen for sale in places now. A recent study by Growth for Up found that there is no longer a problem of coastal inventory lack.
Housing shortages–for both renters and buyers–are plaguing places like Florida (289,000 homes needed), Georgia (118,000 homes needed) and Texas (322,000 homes needed).
Some experts suggest that many current homeowners do not want to sell and jump into a mortgage in order to move or downsize to an environment where people are waiting for a high rate.
According to a recent report from Realtor.Com, 28 out of the 50 largest metropolitan areas experienced a decrease in the availability of homes for sale last year. The three California markets that saw the biggest drop in inventory were San Jose (-44.1%), San Diego (-35.9%), and Sacramento (-33.4%).
According to Kurt Carlton, the president of New Western, a real estate investment company operating across the country, “The majority of home acquisitions typically stem from sellers who put their current residences on the market. The housing market has not come to a standstill because, even before the rise in interest rates, there was already a scarcity of homes available.”
“As a result of fewer listed homes for sale in the neighborhood, sellers are reluctant to pay double the interest rate for a change. Many mortgages, currently held by the majority of homeowners, have rates below 5% within the 3% range.”