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Home prices appear to be softening in specific pockets of the country. However, find out the 10 cities where they remain sky-high.
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Researchers at the University of California San Diego’s (UCSD) Rady School of Management recently released an interesting housing prediction based on a model. This model — unlike those used by Redfin, Zillow, and other price predictors — is believed to have an accuracy rate of up to 70%. Here’s what they found.
In some areas, home prices are falling
Researchers used online search activity to track the rate at which potential home buyers used the internet to search for homes. And let’s face it, nearly all home searches begin by using the internet.
The new model found that housing prices could fall as much as 18% this year in some markets. For example, buyers in San Diego County may end up paying 12% less for a home by the end of the year. In Phoenix, AZ, they’re expected to experience an 18% drop in price. Overall, housing prices are predicted to decrease 5% nationally.
In others areas, prices continue to climb
While mortgage purchase applications are down 35% compared to this time last year, Realtor.com believes home sellers in these 10 cities will remain in the driver’s seat as home values in their pockets of the country continue to rise.
If you’ve created a mental map of where these cities are located, you’ve probably noticed that most are in the Midwest or South. And all but one city has a median list price considerably lower than the national median list price of $414,950.
Why the difference?
As prices began to rise in 2020, it was fairly easy to figure out why. Interest rates were at an all-time low, and housing inventory was so meager that competition broke out among buyers.
As mortgage rates began to rise, it was natural to believe that housing prices across the nation would cool due to fewer potential buyers — and to a degree, that’s been true. Fewer buyers is one reason prices have cooled in select areas of the country. Taking a look at San Diego County, it’s easy to spot a pattern.
Before the pandemic, San Diego County was already one of the more expensive areas of the country. After all, what’s not to love about sunshine, beaches, and friendly people? When interest rates hit rock bottom, more folks believed they could afford to buy and they came out in droves. As the rates rise, one of four things may be happening:
A potential buyer realizes how much their monthly mortgage payment will be and decides against taking the plunge.It becomes clear that a buyer does not qualify for a loan and a mortgage lender denies or rescinds approval.A potential buyer decides to move to a less expensive area of the country.Homeowners who locked in a low interest rate during the pandemic are unwilling to sell their homes and lose that rate. They stay put instead of shopping for a new or larger home.
The least expensive homes in the country have traditionally been in the South and parts of the Midwest. Those are the areas where prices continue to tick upward. That may be because they’re still affordable as compared to the national average. Time will tell if the situation will change as prices in those cities approach or exceed the national average listing price.
Housing inventory
Inventory issues have become a stumbling block to homeownership. The pandemic has made it crystal clear that there is a shortage of new housing units in the U.S., but it takes time for builders to construct new homes and complexes. The lack of available housing is one reason it’s taking months for potential buyers to find a home.
Until inventory issues are addressed nationwide, it’s difficult to imagine how the housing market will approach anything resembling normal. Until that time, the market will be like an old stove cooktop, with some areas warming up more than others.
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