These 49 real estate markets will see home prices fall by more than 15% - this interactive map shows Moody's updated forecasts for 322 markets

These 49 real estate markets will see home prices fall by more than 15% – this interactive map shows Moody’s updated forecasts for 322 markets

The reason why home prices in the United States are falling is quite simple: Affordability under pressure.

A historic shock to mortgage rates – with the average 30-year fixed mortgage rate rising from 3% to 6% this year – following the 41.3% surge in US house prices in just over two years has simply pushed many would-be buyers to breaking point. Other borrowers, who must meet strict lender debt ratios, have completely lost their mortgage eligibility. This historical compression, which stems from prices and rates, is what Fortune calls it “affordability under pressure”.

Already, affordability under pressure has seen U.S. home prices, as measured by the Case-Shiller National Home Price Index, fall for the first time on a seasonally adjusted basis since 2012. U.S. home prices fell 2.2% between June 2022 and September 2022. This corresponds to the second-largest post-World War II house price correction.

Every time a post like Fortune says “US house prices”, we are talking about a national aggregate. Everything that follows in the US real estate market will surely vary by market, price and type of home.

To get an idea of ​​what strength come next, Fortune Once again, Moody’s Analytics has reached out to Moody’s Analytics for its updated home price forecast (see map below) for 322 of the nation’s largest real estate markets. (Here’s their previous metro-by-metro forecast).

Here’s what the data says.

See this interactive chart on

In May, Moody’s Analytics chief economist Mark Zandi said Fortune that the Federal Reserve’s inflation fight would see the US housing market slide into a “housing correction”. At the time, he expected home prices to stagnate nationwide and fall between 5% and 10% in “significantly overvalued” markets.

Zandi, of course, was right about the housing fix. This correction was in fact so strong that in October, Moody’s Analytics again downgraded its national outlook for house prices. From peak to trough, Zandi expects US home prices to fall 10%. If a recession sets in, this outlook changes to a 20% decline from peak to trough.

“No change in our outlook for [national] house prices or the mortgage rate. I feel more confident that the economy will be able to avoid a full-scale recession next year, which is consistent with the 10% peak-to-trough drop in national house prices,” said Zandi. Fortune Friday. Through the spring of 2023, he expects mortgage rates to hover around 6.5%.

While Zandi expects house prices to decline about 10% from peak to trough nationwide, he expects it to vary by region. In markets like Morristown, Tennessee and Muskegon, Michigan, Moody’s Analytics projects home prices will fall 24.1% and 23.3%, respectively. The company expects markets like New York and Chicago to fall 6.3% and 4.2% from peak to trough.

See this interactive chart on

Looking ahead, Moody’s Analytics expects “significantly overvalued” housing markets to experience the steepest declines. (You can find Moody’s market-by-market overvaluation study here).

Look no further than markets like Boise and Flagstaff, Arizona. Just weeks into the pandemic, these markets were flooded with buyer interest from white-collar professionals working in high-cost cities like Seattle and San Francisco. While remote work has been a game-changer for these uprooted white-collar workers, it hasn’t fundamentally changed local incomes. As the boom raged, Boise and Flagstaff became “overvalued” by 76.9% and 65.6%.

Fast forward to 2022, and decelerating levels of migration mean these booming cities must rely more on local incomes. It will be difficult to do, says Zandi. And for that reason, Moody’s forecast model expects home prices in markets like Boise and Flagstaff to fall more than 20% from peak to trough.

See this interactive chart on

During a speech at a Brookings Institute event on Tuesday, Fed Chairman Jerome Powell said the surge in house prices during the pandemic housing boom qualified as a “housing bubble.”

“Coming out of the pandemic, [mortgage] rates were very low, people wanted to buy houses, they wanted to get out of the cities and buy houses in the suburbs because of COVID. So you really had a real estate bubble, you had real estate prices going up [at] very unsustainable levels and overheating and that sort of thing,” Powell said. “So now the housing market will come through the other side of that and hopefully come out in a better place between supply and demand.”

The pandemic housing boom has indeed seen housing fundamentals go haywire. According to Moody’s Analytics, the average US real estate market was “overvalued” by 1% in the second quarter of 2019. During the second quarter of 2022, the average US real estate market was “overvalued” by approximately 25%.

Going forward, Zandi does not expect a financial crisis or a 2008-style foreclosure crisis, but it does expect housing fundamentals to revert to mean. Some of this moderation will come from rising incomes, some from falling house prices.

“Before [home] prices started falling, we were overvalued [nationally] by about 25%. Now that means [home] prices will normalize. Affordability will be restored. The [housing] the market will not be overvalued once this process is complete,” says Zandi. “It’s all about affordability. First-time buyers are excluded from the market. They simply cannot afford the mortgage payments. Trade-in buyers won’t sell and buy because it doesn’t make economic sense.”

See this interactive chart on

Of course, the house price correction has already arrived.

Just over half of the nation’s 400 largest housing markets have seen local home values, as measured by Zillow, fall from their 2022 peak. The average decline being -2%.

The ongoing correction has hit two different types of markets the hardest: high-cost West Coast markets and “bubbly” boom towns.

Even before the correction was in full swing, John Burns Real Estate Consulting said Fortune that high-cost West Coast markets were at higher risk of declining values. The reason is that they are simply more rate sensitive. Markets like Seattle (down 6.3%) and Portland, Oregon (down 5.1%) are being hit with a double whammy: Not only are their high-end real estate markets more rate sensitive, but their technological sectors are too. There’s also the fact that homebuilders and iBuyers — which are more likely to lower their prices during a correction — make up a higher concentration of inventory in the West.

The other group of markets that have been hit hard by the correction are bubbling markets. These markets, which include places like Austin (down 10.2%) and Boise (down 7.1%), have seen their home values ​​detach from underlying fundamentals (i.e. i.e. local incomes) during the boom. And now they are seeing steeper setbacks.

Want to stay up to date on housing correction? Follow me on Twitter at @NewsLambert.

This story was originally featured on

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