The housing market is rebalancing after the most competitive and frenetic period in recent memory. The cooling trend engulfing the market is likely to continue and more cities will see home prices fall around this time next year as the shift to a buyer’s market persists, according to the Knock Buyer-Seller Market Index. published today.
The index, which analyzes key housing market metrics to measure the extent to which the nation’s 100 largest markets favor home buyers or sellers, found home prices in 98 markets in September were below their record price last spring. Providence, Rhode Island and Salisbury, Maryland were the only markets where home prices remained at their highs set earlier this year.
By September 2023, house prices in 42 major real estate markets are expected to fall further from their 2022 highs. Fifteen of these markets are in the South, including three of the 10 markets with the largest forecast price declines. Fifteen are in the West, home to some of the most expensive markets in the country. The remaining 12 markets predicting prices below this summer’s peak are in the Midwest and Northeast, respectively. Bridgeport, Connecticut is expected to see the largest price drop (-7.8%), while Springfield, Missouri will lead the Midwest with an expected price drop of 3.9%.
The top 10 markets with predicted price declines through September 2023 are Boise, Idaho (-16.2%); Lakeland, Florida (-14.2%); Las Vegas (-14.2%); Reno, Nevada (-13.9%); San Francisco (-11.7%); San Jose, California (-9.8%); Austin, TX (-9.3%); Oxnard, California (-9.3%); New Orleans (-9.3%) and Ogden, Utah (-8.3%).
Fifteen markets saw prices fall 10% or more in September from their price peaks, which were set between April and June. Seven of these markets are in the West, seven others in the South and only one, Bridgeport, Connecticut, in the Northeast. Reno, Nevada, Winston-Salem, North Carolina, and Boise City, Idaho saw the biggest declines from their peak prices, dropping 14%, 13.1%, and 13.1%, respectively.
In 15 of the 25 markets with the largest expected median selling price declines, prices peaked well above the national high of $410,000. The median sale price peaked at $1.3 million and $1.6 million in San Francisco and San Jose, California in April 2022, respectively.
In a sign of the current market where high home prices and rising interest rates have pushed many buyers away, just over 1.8 million homes traded hands on the 100 largest markets of the country’s housing in the first nine months of 2022 – less than in the same period in each of the past four years. Although still small, the supply of homes for sale has increased steadily throughout 2022, with the median number of days on market rising to 20 in September, a week more than a year ago.
The average listing sale ratio, which measures how well homes are selling relative to their asking prices, fell to 99% in September, the lowest level since February 2021 and down from 100.3% in May when home prices peaked across the country.
Knock co-founder and CEO Sean Black said based on the results, the shift to a more balanced market is still in its early stages. “We expect this much-needed reset to persist for much of 2023, and while prices will begin to rebound again, they are unlikely to return to their highs for the foreseeable future,” he said.
Black explained: “While many drivers of the housing market, such as demographics and record high unemployment, have not changed, the combination of higher rates and house prices has put affordability to the worst level in 30 years, with entry-level monthly payments set at 34% higher in 2022 compared to 2021. The good news is that as prices fall and rates stabilize once the Fed will have finished its aggressive rate hike campaign – hopefully after its November meeting – buyers will be ready to re-enter the market and sellers will hold on to the majority of the equity gains they have seen over the past two years. “
Nationally, the median home price rose 6.6% to $388,000 year over year in September, but was down 5.4% from its peak of 410,000 $ in May. Although seasonality plays a role in home prices, the rate at which prices are appreciating is well below the double-digit growth seen over the past two years.
According to the index, home prices in 13 of 15 markets will rise year over year, but are expected to remain below their 2022 peak price through September 2023. Winston-Salem, North Carolina (10 .3%), Fayetteville, Arkansas (9.1%) and Seattle (8.9%) will see the largest year-over-year price gains. Home prices in Boise, Idaho and Las Vegas are expected to fall further by this time next year.
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