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Home Prices Rapidly Cooling in Former Booming Markets

Redfin reports that home-price growth has showed signs of slowing at a rapid pace, primarily in pandemic boomtowns including Austin, Texas; Phoenix; and Boise, Idaho as high mortgage rates and an erratic economy has deterred potential buyers.

In the Austin, Texas region, the median price per square foot was up 1.3% year-over-year in October, which is down from approximately 24% year-over-year in February, when mortgage rates were still hovering under 4%. In the Phoenix region, price per square foot was up 6% from a year ago, down from nearly 29% in February. Those 23-percentage-point drops are the biggest among the 99 most populous U.S. metros from February 2022 to October 2022.

The October to February time frame was used as a metric because in many U.S. metros, that particular time period was when the housing market was near its peak in terms of demand and competition.

Austin and Phoenix were both places where home prices soared during the pandemic-era homebuying frenzy, as remote workers flocked from expensive coastal cities to more-affordable Sun Belt destinations. Las Vegas; Boise, Idaho; and Sacramento, California were also among the top 10 metros where price growth was slowing fastest.

“The forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that saw home prices skyrocket over the last few years,” said Redfin Senior Economist Sheharyar Bokhari. “Home prices can only rise by double digits for so long before the growth becomes unsustainable. High rates and stumbling tech stocks are making it unsustainable quite quickly, especially in destinations popular with tech workers. Plus, many of the out-of-towners with big budgets who wanted to move into those places already have.”

Home-price growth was found to be cooling quickly in tech hubs, with San Jose, Oakland, and Seattle all on the top 10 list of cooling markets. San Jose, where the median price per square foot fell nearly 2% in October, was down from 20% growth in February, came in third. Buyers in the pricey Bay Area and Seattle markets were feeling the sting of high mortgage rates and stumbling tech stocks even more than the rest of the U.S.

“Even though affordability is a concern, in many ways we are in a buyer’s market,” said Austin, Texas Redfin Agent Maggie Ruiz. “Some first-time buyers finally have an opportunity to purchase a home without competing with out-of-towners and investors. Because prices and rates are high, a lot of buyers are offering below asking price, negotiating with sellers on a rate buydown, or considering new construction because many builders are offering significant incentives, including rate buydowns, to offload their inventory.”

The median price per square foot was up 11.2% year-over-year in Albany, New York in October, up from a 2.8% increase in February 2022. That marked the biggest price acceleration of the metros in Redfin’s analysis. Albany was followed by Bridgeport, Connecticut, where price per square foot grew 7.5% in October, up from 4% in February; and McAllen, Texas (18.7%, up from 16.1%).

All five of the metros where price growth has sped up this year as the nationwide housing market cools are affordable places with relatively stable local markets. Four of the five have median home prices below the national median—with Bridgeport, Connecticut as the exception. Prices in those places grew during the pandemic, but they didn’t skyrocket like much of the rest of the country, so there’s not nearly as much room to fall.

Click here for more on Redfin’s analysis of the fastest cooling markets in the nation.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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