Home price growth has slowed fastest in cities booming from the pandemic, including Phoenix, Austin, Texas and Boise, Idaho, as high mortgage rates and an uncertain economy deter potential buyers. That’s according to a new report from Redfin, a tech-focused real estate brokerage firm.
Austin’s median price per square foot rose 1.3% year over year in October. That’s down from around 24% year-over-year in February, when mortgage rates were still hovering below 4%, near record lows. And in Phoenix, the price per square foot is up 6% from a year ago, up from nearly 29% in February. These 23 percentage point declines are the largest among the 99 most populous metros from February to October 2022. Redfin compared October to February because in many metros, that’s when the housing market was close to its peak in terms of demand and competition.
Austin and Phoenix are the two places where home prices soared during the pandemic-era home-buying frenzy, as remote workers flocked from expensive coastal towns to more affordable destinations in the Sunbelt. Las Vegas, Boise and Sacramento are also among the top 10 metropolises where price growth is slowing the fastest.
Phoenix, Austin and Las Vegas were all among the metros that welcomed the most new residents in 2021, and Phoenix, Las Vegas and Sacramento all consistently rank on Redfin’s list of most popular destinations for homebuyers moving. from out of town. Boise and its suburbs have been among the fastest growing cities in the country in recent years, attracting many new residents from California. Foreigners with big budgets have helped drive up home prices in these popular destinations in 2021 and 2022. Home prices have risen more than 30% over the past two years in Phoenix, Austin and Boise, the home typical now selling for nearly $500,000 in all three.
“Forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that have seen house prices skyrocket in recent years,” the economist said. Redfin principal, Sheharyar Bokhari. “Home prices can only rise by double digits for so long before growth becomes unsustainable. High rates and stumbling tech stocks make it unsustainable pretty quickly, especially in destinations popular with tech workers Also, many out-of-towners with big budgets who wanted to move into these places have already done so.
Austin Redfin agent Maggie Ruiz said the pandemic homebuying boom had driven prices up so much that her area had become unaffordable for many residents, and she noticed that migration to the area and investment purchases were slowing considerably.
“Even though affordability is a concern, in many ways we’re in a buyer’s market,” Ruiz said. “Some first-time buyers finally have the opportunity to buy a house without competing with foreigners and investors. Because prices and rates are high, many buyers offer offers below the asking price, negotiate with sellers for a rate buyout, or consider new construction, as many builders offer significant incentives, including rate buyouts , to unload their inventory.
Price growth is also slowing rapidly in West Coast tech hubs
Home price growth is also slowing particularly rapidly in tech hubs, with San Jose, California; Oakland, California and Seattle are all on the top 10 list. San Jose, where the median price per square foot fell about 2% in October from a 20% growth in February, comes in third.
Buyers in the ultra-expensive markets of the Bay Area and Seattle are feeling the sting of high mortgage rates and stumbling tech stocks even more than the rest of the country. This makes continued double-digit home price growth unsustainable.
Price growth is accelerating in some affordable East Coast and Midwest locations
Price growth accelerated in five of the 99 most populous metropolises. Three are on the East Coast, one in the Midwest and one in Texas.
The median price per square foot rose 11.2% year over year in Albany, New York, in October, compared with a 2.8% increase in February. This is the largest acceleration in metro prices in this analysis. It is followed by Bridgeport, Connecticut, where the price per square foot rose 7.5% in October, compared to 4% in February, and McAllen, Texas (18.7%, compared to 16.1%).
The five metros where price growth has accelerated this year as the national housing market cools are affordable places with relatively stable local markets. Four of the five have median home prices below the national median (Bridgeport is the exception). Prices in these places have gone up during the pandemic, but they haven’t skyrocketed like in most other countries, so there’s not as much room to drop.
Places like Albany and Milwaukee feel the impact of high mortgage rates less than other areas because the lower the house price, the smaller the dollar’s impact on monthly mortgage payments.
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