Updated interactive map: The home price correction (or lack thereof) in the 400 largest US housing markets

Across the country, mortgage brokers and builders are scrambling millions of potential buyers sit on the sidelines after last year’s historic mortgage rate shock. The numbers aren’t pretty: On a year-over-year basis, mortgage purchase applications fell by 36.4% and current home sale fell to 35.4%.

while Home transactions become a free fall in the second half of 2022, house prices felt a slight impact. Through October, the trend in US home prices fell just 2.4%, as measured by the Case-Shiller National Home Price Index. On the one hand, that’s telling the second largest house price correction in the post-WWII era. On the other hand, this is mild compared to the 26% peak-to-trough crash in US home prices from 2007 to 2012.

In the future, the chief economist of Moody’s Analytics Mark Zandi expects that the story will begin to change: The free fall of home sales will soon disappear, while the correction of home prices will continue.

“Housing demand (home sales) is near a trough, housing supply (housing starts and completions) hasn’t hit yet, and home prices have a way to go before reaching their nadir,” Zandi said luck.

At a time when US home prices are low, Zandi expects them to be 10% below the 2022 peak. He’s not the only economist who thinks house prices will continue to fall: Among the 24 major housing forecasters tracked by luck17 predict that US home prices will fall further in 2023. (Another seven firms think that US home prices will remain flat or rise to low single-digit amounts in 2023).

“The downturn in the housing market, caused by rapidly rising mortgage borrowing costs, continues to be a cause for our significant concern. Prices have increased significantly over the past two years as the demand exceeds the limited supply of homes, but this process is reversing,” wrote James Knightley, chief international economist at ING. His company expects a nearly 10% peak-to-trough decline in prices in house in the US.

Remember, when a group like ING or Moody’s says US home prices, they’re talking about a national aggregate. Whatever comes next may vary by market. After all, there’s a reason industry types want to talk real estate is local.

To better understand the region’s home price story, luck examined the Zillow Home Value Index (ZHVI) for November 2022.*

Through November, home values ​​in 254 of the nation’s 400 largest housing markets were below their 2022 peak. In the markets, the average decline was 2.1%.

“Home values ​​fell 0.2% in November, continuing a slow decline that began this summer. Again, the proximate cause can be traced to high mortgage rates,” wrote Zillow reviewerrdear. “While national prices have only fallen, they have fallen more dramatically in many previously hot housing markets.”

The markets hit hardest by the correction fell into one of two groups.

The first group are boomtowns, often second-home markets or up-and-coming cities, where remote workers have moved during the pandemic and pushing local house prices beyond what local incomes can support. That “bubble” can be explained why home prices fall faster in boomtown markets such as Coeur d’Alene, Idaho (where home values ​​are down 10.8% from their peak); Austin (down 10.4%); Phoenix (down 8.1%); Las Vegas (less than 8%); Salt Lake City (down 7.9%); and Reno (down 7.6%).

The second group consists of expensive markets along the West Coast, including places like San Jose (where home values ​​are down 10.6% from their peak); San Francisco (down 9.5%); Santa Cruz, California (down 8.4%); and Seattle (down 5.8%). Historically, those high-end markets have weakened whenever the stock market falls into bear territory or mortgage rates spike. Of course, two red flags occurred in 2022.

While home prices in 254 major markets are below their 2022 peaks, another 146 major markets remain at their 2022 peaks. The ongoing mortgage rate shock has not factored in home values, as measured by Zillowwhich will fall in markets such as Indianapolis, Miami, and Philadelphia.

So the coast is clear in markets like Miami and Philadelphia, right? Not so fast, says Moody’s.

While the home price correction has yet to affect tight inventory markets like Miami and Philadelphia, it could this year. Moody’s expects home prices to decline further this year in every major housing market in the region. In cities like Miami and Philadelphia, Moody’s expects peak-to-trough declines to hit 16.9% and 5.3%, respectively. (Here is the Moody’s outlook for the nation’s 322 largest markets.)

while the continued decline in housing translates into the US housing market shifting from inflation-mode to deflation-mode, it barely touched the gains accrued during the Pandemic Housing Boom. As of October 2022, US home prices remain 38.1% above March 2020 levels.

Even in the housing markets hit the hardest in the correction, including San Francisco (down 9.5% from 2022 peak) and Austin (down 10.4% from 2022 peak), prices remain more than pre-pandemic levels. In fact, as of October, home values ​​in San Francisco were 16.9% above pre-pandemic levels while those in Austin rose 57.1%.

*Note: The Zillow Home Value Index (ZHVI) is a measure of the average home value in a region. According to Zillowthe index “reflects the average value for homes in the 35th to 65th percentile range.” luck pulled the “raw version” of ZHVI that is not seasonally adjusted.

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