Norada Real Estate Investments

Housing Market Cooling Off in 2023: Top Markets Slowing Down

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Is the Housing Market Cooling Off?

The housing market has been on an upward trajectory in recent years. However, rising interest rates, slowing sales, and slower home price rises indicate a cooling market. Mortgage rates reached their highest level last year, eclipsing 7 percent for the first time in 20 years amid the U.S. Federal Reserve's ongoing battle with inflation. Rate hikes have made homes less accessible, slowing demand.

The cooling off of the US housing market has led some experts to speculate about the possibility of a housing bubble. While there are no clear signs of a bubble at the moment, the rapid rise in home prices over the past few years has raised concerns about a potential correction in the market. The deceleration in home price growth and slowing sales may be early indications that the market is heading toward a more sustainable level, but it remains to be seen whether these trends will continue or if the market will experience a more significant correction.

A housing bubble usually begins with a boost in housing demand while inventory is limited, which can cause housing prices to spike. That bubble can burst when demand falls or stagnates even while supply increases because of the earlier jump in demand. This can spur a sharp decrease in home prices when the new supply of homes lacks buyers willing or able to pay the higher costs.

There is no clarity regarding the housing market forecast for 2023. Most analysts predict that home prices will grow in the majority of the housing markets next year albeit slightly. If inflation persists, the Fed could tighten more than anticipated by the financial markets. This would result in higher mortgage rates, which will impact the U.S. housing market. If inflation falls or a recession develops in the near future, the Fed may soften financial conditions.

While it remains unclear if the U.S. housing market will crash, consumer confidence in the market increased 0.6 points in November to 57.3, its first increase in nine months, though it remains just above the all-time low set last month and significantly lower than its level at this time last year, according to Fannie Mae's Home Purchase Sentiment Index (HPSI).

16% of respondents indicated that now is a good time to buy a home – unchanged from the previous month – while the percentage who believe now is a good time to sell a home increased from 51% to 54%. Year over year, the full index is down 17.4 points. Both consumer homebuying and house-selling sentiments are much lower than they were last year, which is predictable given that mortgage rates have more than quadrupled and home prices remain high.

According to a recent report from Redfin, a technology-powered real estate brokerage, expensive housing markets in the U.S. are cooling down amid rising mortgage rates, inflation, a slowing stock market, and general economic uncertainty. The company analyzed the 100 most populous metropolitan areas based on how quickly they cooled from February to August based on year-over-year changes in prices, price drops, supply, pending sales, sale-to-list ratio, and share of homes that went off the market in two weeks.

Some of the fastest-cooling cooling areas include both those that have long been expensive and places that became significantly less affordable during the pandemic because they attracted scores of relocating homebuyers. According to Redfin’s report, Seattle’s housing market is cooling off faster than any other in the country. The good news is that the slowdown is dampening competition and giving those who can still afford to buy more negotiating power

Homebuyer demand and competition are down in Washington state city. About 34% fewer homes sold within two weeks in August than a year earlier. Home prices are also falling, with the typical property selling for 2% less in August than a month earlier. These stats indicate that Seattle buyers have more to choose from, and homes are taking longer to sell. Tacoma is also among the top 10 markets cooling fastest.

Las Vegas, Nevada scored second on the list, with home values falling 3% in August from the previous month and around 26% fewer homes selling within two weeks than a year before. Third place goes to San Jose, CA, where the housing market has likely cooled since the Fed's rate hikes and rising mortgage rates have made it more difficult to buy a property there.

Top 10 Cities Where Housing Markets Are Cooling the Fastest

  1. Seattle, WA
  2. Las Vegas, NV
  3. San Jose, CA
  4. San Diego, CA
  5. Sacramento, CA and Denver, CO (tie)
  6. —
  7. Phoenix, AZ
  8. Oakland, CA
  9. North Port, FL
  10. Tacoma, WA

Top 10 Housing Markets Cooling Off The Most

Buyers of new homes are growing increasingly wary. Rising mortgage rates and declining home sales have heralded the end of a hot housing market that has afflicted buyers for more than a year. According to the Census Bureau, home sales have decreased by over 18% since January 2022. Some locations, though, have cooled faster than others.

SmartAsset examined the 100 largest metro areas, 92 of which had complete data, to determine where housing markets are cooling the most. They compared locations using eight metrics divided into two categories: price reduction and decreased demand. Here are the key findings of the report.

  • California metro areas are cooling off the most.
  • Three California metro areas rank in the top 10 for our study.
  • In these areas, homes are staying on the market longer relative to a year ago – nearly double the amount of time.
  • Moreover, all three areas have seen over a 33% decrease in the number of houses sold monthly from August 2021 to August 2022.
  • The share of listings with price cuts is up 10% from a year ago.
  • Nationally, about 16% of home listings had a price cut in August 2021.
  • Comparatively, that figure is now almost 26%.
  • Homes are on the market for less than 10 days in 36 metro areas.
  • Last year, 67 metro areas fell into that category.
  • Nationally, the average time on the market for a home listing currently stands at 13 days.

1. Boise, ID

The housing market in Boise, Idaho is cooling off the most relative to all other metro areas in our study. Boise has the sixth-lowest ratio of the number of sold houses to new listings (0.49), meaning that almost twice as many houses are being listed relative to the ones that are sold. The median days a house sits on the market is 20, and this figure is almost 186% higher than one year previously.

2. Austin-Round Rock-Georgetown, TX

The fourth-largest metro area in Texas has experienced a chill in its housing market with the fourth-largest decrease in demand and the 13th-largest price reductions. Across specific metrics, Austin-Round Rock-Georgetown has the second-highest median days on the market for home lists (27 days) and the fourth-worst ratio of houses sold to new listings (0.49).

3. Phoenix-Mesa-Chandler, AZ

Phoenix-Mesa-Chandler, Arizona ranks No. 3 overall. The metro area has the fifth-highest percentage of house listings with a price cut (39.61%), which is 25% points higher than a year ago. Additionally, the number of houses sold in a month has declined by more than 41% between August 2021 and August 2022.

4. San Jose-Sunnyvale-Santa Clara, CA

San Jose-Sunnyvale-Santa Clara, California ranks in the top 10 for both larger price reductions and lower demand. Houses are on the market for roughly 19 days (eighth-highest), which is a 90% increase since exactly one year ago (18th-highest). There has also been a 43.17% decrease in the number of houses sold and 26.81% of current listings have a price cut.

5. Las Vegas-Henderson-Paradise, NV

Across all 92 metro areas we considered, Las Vegas-Henderson-Paradise, Nevada ranks worst for our decreased demand category. Over the past year, the number of houses sold monthly has fallen by about 44%. And as a result, Las Vegas-Henderson-Paradise has the third-lowest ratio of the number of sold houses to new listings (0.48), meaning that almost twice as many houses are being listed relative to ones that are sold.

6. Salt Lake City, UT

Salt Lake City, Utah has the eighth-largest decrease in demand and 16th-largest price reductions. Specifically, this area takes spots in the top 10 across five metrics including the percentage of listings with a price cut (41.89%) and the one-year change in the number of houses sold monthly (down 41.88%).

7. North Port-Sarasota-Bradenton, FL

Home prices in North Port-Sarasota-Bradenton, Florida are experiencing significant reductions. As of August 2022, over 31% of house listings have a price cut and the average price cut as a percentage of the home value is almost 6%. Relative to one year previously, this is a 17% increase in the percentage of homes with a price cut.

8. San Diego-Chula Vista-Carlsbad, CA

The San Diego-Chula Vista-Carlsbad, California metro area takes a top 15 spot across three metrics: the one-year change in houses sold (35.53% decrease), the one-year change in the median amount of time that a house is on the market (two times higher) and the percentage point difference between the share of listings with a price cut over one year (17.78%).

9. Provo-Orem, UT

Price reductions on homes in Provo-Orem, Utah have been widespread. The metro area has the second-highest share of listings with a price cut (45.58%) and the largest increase in this figure relative to one year prior (26.26%). In terms of demand, there was a 57.38% decrease in houses sold in the area from August 2021 to August 2022 and there were nearly double the new listings compared to houses sold in August 2022.

10. Stockton, CA

Rounding out the top 10 is Stockton, California, which eighth-longer an average number of days on the market for home listings (19 days) and the 10th-highest one-year change in the percentage of listings with a price cut (33.85%). As of August 2022, over a third of home listings in the area experience a price cut.

Sources:

  • https://smartasset.com/data-studies/where-housing-markets-are-cooling-off-most-2022
  • https://www.redfin.com/news/housing-markets-cooling-fastest-seattle-august-2022/

Housing Market Crash 2023: When Will Real Estate Crash Again?

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Will the Housing Market Crash

The US housing market is going through a crucial period in 2023 with conflicting opinions on the future of the market. The housing market has been experiencing a period of significant growth in recent years, with record-low mortgage rates and high demand pushing home prices to all-time highs. However, concerns about a housing market crash have started to surface, with some experts sounding the alarm that the US housing market may be on the verge of a crash.

In this article, we will explore the current state of the housing market, analyze the factors that may contribute to a potential crash, and assess whether a market crash is likely to occur in the near future. Some housing analysts are anticipating a more balanced market with single-digit annual appreciation while others fear a housing market crash or collapse in the near future.

Will the Housing Market Crash?

Inflation is soaring, and there is a fear of an impending recession in the country. However, the majority of real estate professionals do not believe that the housing market is in a bubble or poses a threat to the faltering economy.

Housing caused the worst financial crisis in recent memory. When shoddy mortgages crumbled, the nation was left with foreclosures, numerous new houses remained empty, and millions of Americans were suddenly underwater. Throughout the preceding century, the housing market met considerable barriers, but none, with the exception of the Great Depression of 1929, led to the decrease in home values that happened during the Great Recession of 2007.

It is also important to note that not all economic downturns dampen the real estate market. Despite the economic downturn, the home market and demand remained robust during the 2001 recession. The housing market has been subjected to a number of severe hurdles during the course of the previous century; but, with the exception of 1929's Great Depression, none of these challenges have resulted in a decrease in house values comparable to that of 2007's Great Recession.

The housing market's recent pandemic boom with skyrocketing prices, bidding wars, and an influx of investors has parallels to the previous time. However, this time, the majority of real estate professionals believe that the housing market won't crash or trigger a recession and may even assist the country's recovery. The mortgage sector has taken action against loans that ballooned in size or were intended for borrowers to fail. Only purchasers with consistent, verifiable income may now qualify for mortgages.

This has resulted in a significantly lower risk compared to the Subprime lending during the Great Recession of 2005-2007. The majority of bad mortgages have been eliminated, and lenders have stricter requirements on borrowers. The housing shortage is too severe with many more individuals trying to purchase and rent houses than there are available.

Year-over-year home price growth decelerated in 2022 as mortgage rates rose and housing affordability declined. With mortgage rates continuing to remain high, home prices are predicted to decline in the near term. However, experts do not anticipate the widespread unemployment that characterized the Great Recession and also believe that the recession will be quite brief if it occurs. This means fewer homeowners will be unable to pay their mortgages and those who are struggling may decide to sell their homes at a profit.

Many tapped-out homeowners are stepping back as mortgage interest rates rise into the 6%+ range or close to 7%. Some no longer qualify for mortgages big enough to finance the home they desire, others cannot afford the increased rates and prices, and some are taking a wait-and-see strategy out of fear of a recession. As a result, fewer properties are selling, bidding wars are subsiding, and bids beyond the asking price are decreasing. Numerous house sellers have been compelled to reduce their asking prices.

In the event of a recession, mortgage rates are anticipated to decline, which should reintroduce buyers who did not lose their jobs to the housing market. This will increase home sales and benefit the economy as a whole. The housing market can assist the nation in climbing out of a recession.

While the US housing market is experiencing changes in 2023, most real estate professionals do not believe that it will crash or trigger a recession. The mortgage sector has taken action to prevent a repeat of the Great Recession, and the majority of bad mortgages have been eliminated. The housing shortage is too severe, and the majority of Americans are hoping to avoid another 18 months of hardship. The housing market may even assist the nation's recovery in the event of a recession by increasing home sales.

Millennial Housing Demand: A Buffer Against Housing Market Crash

The housing market crash is a concern for many potential home buyers and sellers. However, the increased demand for homes from the millennial generation may act as a buffer against a potential crash. Millennials and Gen Z want more housing. The housing market is one of the most important indicators of economic growth, and it has been showing some signs of instability in recent years. However, the increased demand for homes from the millennial generation may act as a buffer against the housing market crash.

According to the National Association of Realtors' 2022 Home Buyer and Seller Generational Trends report, millennials now make up the largest percentage of home buyers at 43%, with Generation X buying the most expensive homes at a median price of $320,000.

The report also found that most buyers purchased homes in suburban areas and small towns, dispelling the myth that younger generations are flocking to city centers. Millennials, in particular, are more likely to use the Internet to find a home they will ultimately purchase, and 92% of them use real estate agents to help find the right home and negotiate the terms of the transaction.

The trend of younger generations purchasing homes for the first time is also on the rise, with 81% of younger millennial home buyers purchasing a home for the first time, and just under half of older millennial buyers being first-time buyers. Additionally, the percentage of millennial sellers is on the rise, increasing from 22% to 26% over the past year.

Many factors can contribute to the decision to buy or sell a home, and for all home buyers under the age of 57, the main driver was the desire to own a home of their own. Among those 57 and older, the desire to be closer to friends and family was the top reason, followed by the desire for a smaller home.

While younger generations tended to move shorter distances when relocating, the overall buyers expected to live in their homes for 12 years, down from 15 years last year. For younger millennials and the silent generation, the expected duration was only 10 years, compared to 20 years for younger boomers.

However, debt continues to be a significant barrier for many attempting to buy a home, and both Generation X and younger boomers delayed purchasing a home for five years due to debt, the longest of all age groups. Younger millennials had the highest share of student debt at 45%, with a median amount of $28,000.

Despite these challenges, the increased demand for homes from the millennial generation provides a buffer against a housing market crash. This demand is expected to continue to grow as more of the millennial generation reaches the traditional first-time buyer age, and with this trend, the housing market may remain stable even in uncertain times.

When Will the Housing Market Crash Again?

The current state of the real estate housing market, which is currently adjusting to record-high inflation and higher interest rates, is giving real estate companies and experts a run for their money, as the continued pressure of these forces is causing difficulties for those who make future predictions. What are the housing market crash predictions? Before answering this question, it is crucial to comprehend what causes real estate markets to fall in the first place.

First, it is essential to recognize that housing markets do not suddenly crash. Multiple variables will exert pressure on a market over time, eventually leading to its collapse. When home values climb too rapidly, a housing bubble arises. When there's demand and the capacity to buy, it may increase. When there aren't enough houses for sale to match demand, competition drives up prices.

When a housing bubble expands and pressure builds, the housing market may crash. Interest rate hikes slow the economy. Demand and jobs might drop. Oversupply promotes a buyer's market and cheaper pricing. The real estate market might then fall or stall down. How can you know how awful and how fast it will go better? It depends on how sustainable development was before the slowdown and how serious the causes are.

Many concerns remain about the housing market. Critically, while one of the biggest drivers of home price growth has been the lack of supply, higher rates are holding back both potential sellers and new construction. As such, there is no relief in sight for an improvement in the housing supply and the sustainable housing market that would come with increased inventory.

As we enter the second half of 2023, many are wondering whether the housing market is headed for a crash. Speculation about a potential housing market crash has been a hot topic of discussion, and people are eager to know what the future holds. While there are signs of a slowdown in the housing market's year-over-year growth rate, the overall data and forecasts suggest that a crash is unlikely in 2023.

Let us analyze the latest data provided by CoreLogic to gain insights into the current housing market trends and whether a crash is imminent.

National Home Price Trends

As of May 2023, CoreLogic's Home Price Index (HPI) reveals that home prices nationwide, including distressed sales, have increased by 1.4% compared to May 2022. Additionally, on a month-over-month basis, home prices rose by 0.9% in May 2023 compared to April 2023.

Price Forecast

According to CoreLogic's HPI Forecast, the data suggests that home prices will continue to rise in the coming months. The forecast indicates a 1% month-over-month increase from May 2023 to June 2023 and a year-over-year increase of 4.5% from May 2023 to May 2024.

Regional Home Price Trends

The housing market exhibits regional variations in price trends, with some areas experiencing declines while others witness significant gains.

Western States

A significant number of Western states saw prices decline in May 2023 compared to the same period in 2022. This decline can be attributed to out-migration from less-urban locations, where people had moved during the peak of the pandemic. The resulting surge in home prices led to a significant loss of affordability in these regions.

Northeastern and Southeastern Metro Areas

In contrast, Northeastern states and Southeastern metro areas continue to see larger home price gains compared to other parts of the country. This can be attributed to workers slowly moving back to job centers in some areas and settling in relatively affordable places in others.

Expert Insights on Housing Market Crash

Selma Hepp, Chief Economist for CoreLogic HPI, provides valuable insight into the current trends:

“After peaking in the spring of 2022, annual home price deceleration continued in May. Despite slowing year-over-year price growth, the recent momentum in monthly price gains continues in the face of recent mortgage rate increases. Nevertheless, following a cumulative increase of almost 4% in home prices between February and April of 2023, elevated mortgage rates and high home prices are putting pressure on potential buyers. These dynamics are cooling recent month-over-month home price growth, which began to taper and is returning to the pre-pandemic average, with a 0.9% increase from April to May.”

National and State Maps – May 2023

The CoreLogic HPI provides comprehensive measures for multiple market segments across the nation. Here are some key highlights:

  • Nationwide, home prices increased by 1.4% year over year in May 2023.
  • States experiencing annual declines in home prices include Arizona, California, Colorado, Idaho, Montana, Nevada, New York, Oregon,
  • South Dakota, Utah, Washington, and the District of Columbia.
  • The states with the highest year-over-year increases in home prices were Maine (7.2%), New Jersey (7.1%), and Indiana (6.9%).
    Top Metros

The CoreLogic HPI also offers insights into home price changes in large US metros in May 2023. Miami leads the way with the largest gain, experiencing an 11.8% year-over-year increase in home prices.

Therefore, based on CoreLogic's data and analysis, the US housing market has experienced steady growth in home prices, with certain regions witnessing declines due to specific economic factors. While the overall trend shows a deceleration in annual price growth, the recent momentum in monthly price gains continues.

Where Can the Housing Market Crash?

The housing market is subject to fluctuations and can experience price declines in certain areas. Based on CoreLogic's Market Risk Indicator (MRI), specific markets are at higher risk of home price decline in the coming months. Let's take a closer look at some of these markets:

1. Provo-Orem, UT

According to CoreLogic's MRI, Provo-Orem, UT, stands at very high risk (with a 70%-plus probability) of experiencing a decline in home prices over the next 12 months. The factors contributing to this risk may vary and could include local economic conditions, housing supply, and affordability issues.

2. Lakeland-Winter Haven, FL

Another market at very high risk for price declines is Lakeland-Winter Haven, FL. The potential reasons for this elevated risk could be linked to the local economic conditions, population dynamics, and the overall housing market performance in the region.

3. North Port-Sarasota-Bradenton, FL

Similarly, the North Port-Sarasota-Bradenton, FL, area also falls into the category of markets with a high risk of home price decline. Economic indicators and housing market trends could be influencing factors behind this risk.

4. Cape Coral-Fort Myers, FL

Cape Coral-Fort Myers, FL, is yet another market that is flagged as being at very high risk for potential price declines. Homebuyers and sellers in this region need to be vigilant and consider the market conditions when making decisions.

5. Port St. Lucie, FL

Port St. Lucie, FL, completes the list of markets with a high risk of home price decline. Local factors such as job growth, inventory levels, and demand-supply dynamics could be critical factors affecting the housing market in this region.

It's worth noting that the high risk does not necessarily mean that a crash in home prices is imminent. It signifies a higher probability of price declines relative to other regions. Market conditions can change, and external factors such as economic shifts or policy changes can influence the housing market dynamics. Therefore, ongoing monitoring and consultation with real estate professionals who are familiar with the local market are crucial for making informed decisions.

If you are considering buying or selling a home in these high-risk areas, it may be prudent to evaluate your financial situation, consider the potential impact of a price decline, and consult with experts who can provide guidance tailored to your specific circumstances. This approach will help you navigate the market more effectively and make informed decisions based on the current conditions and potential risks associated with these regions.

Conclusion

In conclusion, while the housing market may be experiencing a slowdown in year-over-year growth, the data and forecasts do not suggest an imminent crash in 2023. Home prices continue to rise, albeit at a slower pace, and market indicators provide a generally positive outlook.

The US housing market is going through a crucial period in 2023 with conflicting opinions on the future of the market. Some analysts fear a housing market crash, while others anticipate a more balanced market with single-digit annual appreciation. Although the market is experiencing changes, most real estate professionals do not believe that it will crash or trigger a recession.

The mortgage sector has taken action to prevent a repeat of the Great Recession, and the majority of bad mortgages have been eliminated. The housing shortage is too severe, and the majority of Americans are hoping to avoid another 18 months of hardship. Housing demand from Millennials and Gen Z is also expected to remain strong. While there may be a decline in demand and the pandemic-induced housing boom may slow down somewhat, there are no signs of a housing market crashing again in 2023.

Sources:

  • https://www.realtor.com/news/trends/recession-will-housing-market-survive/
  • https://www.noradarealestate.com/blog/housing-market-predictions/
  • https://www.corelogic.com/intelligence/u-s-home-price-insights/
  • https://cre.moodysanalytics.com/insights/research/q42022-the-outlook-for-the-housing-market/
  • https://www.forbes.com/advisor/mortgages/real-estate/will-housing-market-crash/
  • https://www.zillow.com/research/zhpe-q2-2022-not-a-bubble-31093/
  • https://www.freddiemac.com/research/forecast
  • http://www.freddiemac.com/research/forecast/20210715_quarterly_economic_forecast.page
  • https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx

CoreLogic Forecasts 3.5% Growth in HPI from July 2023 to 2024

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The US housing market has been experiencing fluctuations in home prices and market activity. In this blog post, we will explore the current market trends and forecast for home prices in the United States. The information provided here is based on data from CoreLogic, a leading provider of property information and analytics. By analyzing the latest data, we can gain valuable insights into the state of the housing market and make informed decisions. So let's dive in and explore the US Home Price Insights for 2023.

Home Price Forecast
Source: CoreLogic

US Home Price Insights – September 2023

The CoreLogic HPI and HPI Forecasts provide valuable data and analysis to understand the current market trends and make informed decisions. In this comprehensive report, we'll provide you with the latest insights into the US housing market as of September 2023. We'll explore trends, forecasts, and regional variations in home prices, giving you a clear picture of the current real estate landscape.

Overview of July 2023 Home Prices

Home prices nationwide, including distressed sales, increased year over year by 2.5% in July 2023 compared with July 2022. This indicates a positive trajectory in the housing market, with property values on the rise. Additionally, on a month-over-month basis, home prices saw a healthy increase, climbing by 0.4% in July 2023 compared with June 2023. It's worth noting that CoreLogic follows standard procedures for revisions with public records data to ensure data accuracy.

Forecast for Home Prices

The CoreLogic HPI Forecast predicts continued growth in home prices. Specifically, it anticipates a month-over-month increase of 0.4% from July 2023 to August 2023 and a year-over-year increase of 3.5% from July 2023 to July 2024. These forecasts suggest a stable and favorable market for homeowners and prospective buyers.

Annual U.S. Home Price Growth Rebounds in July

In July, U.S. home price gains bounced back year over year, reaching 2.5%. This growth follows two months of 1.6% annual gains. The annual reacceleration can be attributed to six consecutive monthly gains, driving prices approximately 5% higher than their lowest point in February.

However, it's worth noting that the 11 states that experienced home price declines were all located in the West. Nevertheless, given the inventory shortages in these markets, this trend may be short-lived, and recent buyer competition could drive prices higher once again. CoreLogic projects that all states that saw year-over-year losses in July will likely start posting gains by October of this year.

“Annual home price growth regained momentum in July, which mostly reflects strong appreciation from earlier this year. That said, high mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations.

Nevertheless, the projection of prolonged higher mortgage rates has dampened price increase forecasts over the next year, particularly in less-affordable markets. But as there is still an extreme inventory shortage in the Western U.S., home prices in some of those markets should see relatively more upward pressure.”

Selma Hepp

– Chief Economist for CoreLogic

National and State Maps – July 2023

The CoreLogic HPI provides detailed measures for various market segments, known as tiers. These segments are based on factors such as property type, price, time between sales, loan type (conforming vs. non-conforming), and distressed sales. Across the nation, home prices saw a year-over-year increase of 2.5% in July.

Notably, several states, including Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Texas, Utah, Washington, and Wyoming, experienced declines in annual home prices. Conversely, Vermont led with the highest increase at 8.5%, followed closely by New Hampshire and New Jersey, both at 7.3%.

HPI Top 10 Metros Change

The CoreLogic HPI continues to provide valuable insights, segmented by property type, price, sales intervals, loan type, and distressed sales. For July, let's take a closer look at home price changes in some of the largest U.S. metropolitan areas. Miami stands out with the largest gain, posting an impressive 9% year-over-year increase in home prices.

Markets to Watch: Top Markets at Risk of Home Price Decline

The CoreLogic Market Risk Indicator (MRI) offers a monthly assessment of the overall health of housing markets nationwide. According to the MRI, Provo-Orem, UT, carries a very high risk (70%-plus probability) of a decline in home prices over the next 12 months. Other areas with significant risk include Spokane-Spokane Valley WA, Cape Coral-Fort Myers, FL, North Port-Sarasota-Bradenton, FL, and Lakeland-Winter Haven, FL. These insights serve as important indicators for both buyers and sellers in these markets.

Hence, the US housing market continues to show resilience and growth, with home prices on an upward trajectory. While challenges such as high mortgage rates and inventory shortages persist, the overall outlook remains positive. Buyers, sellers, and investors should closely monitor the specific dynamics in their respective markets to make informed decisions. CoreLogic's data and insights play a crucial role in understanding the ever-evolving real estate landscape, enabling individuals and businesses to navigate the market effectively.

US CoreLogic S&P Case-Shiller Index

US CoreLogic S&P Case-Shiller Index
Source: CoreLogic

The CoreLogic S&P Case-Shiller Index provides valuable insights into the health of the housing market and its trends. Let us delve into the latest developments in the US housing market, as reflected in the CoreLogic S&P Case-Shiller Index for the month of June 2023. The data suggests significant shifts in market dynamics, impacting both home prices and buyer behavior.

Changing Market Dynamics

The US housing market is undergoing a transformation, with Midwestern metro areas like Cleveland and Chicago emerging as the hottest housing markets, while previously booming Mountain-West cities like Denver and Phoenix are cooling off. These shifts are indicative of changing buyer preferences and economic factors affecting the real estate landscape.

Impact of Elevated Mortgage Rates

Despite a strong start in 2023, the housing market is facing headwinds due to elevated mortgage rates. These rates are creating challenges for potential buyers, limiting their ability to enter the market. As a result, the market is expected to see moderate gains for the remainder of the year. However, according to CoreLogic's Home Price Index forecast, home prices are still projected to reaccelerate and achieve mid-single-digit growth rates by the end of the year.

Regional Variations in Price Growth

The acceleration in home prices has been most notable in markets that remained relatively affordable throughout the pandemic and experienced less significant shifts due to household migration. These markets include those in the Midwest and New England regions. As a result, home prices in these areas are now catching up with traditionally more expensive markets.

June S&P Case-Shiller Index Insights

In June, the CoreLogic S&P Case-Shiller Index revealed a significant trend: flat year-over-year home prices. However, this seemingly stagnant data is a reflection of price drops that occurred in 2022. Nevertheless, the non-seasonally adjusted, month-over-month index posted its fifth consecutive month of gains, rising by 0.9% in June. While this increase is slightly smaller than the one recorded in May (1.3%), it signifies a continuing upward trajectory.

Market Recovery and Plateau

With five months of monthly gains, home prices have now risen by 5% since February of the same year and have returned to their 2022 peak levels. This recovery has been robust, but it is also accompanied by signs of a plateau, primarily due to the influence of higher mortgage rates.

Regional Highlights

In June, several metropolitan areas experienced annual home price gains that accelerated from the previous month. Notably, West Coast markets like San Diego and Seattle stood out for their significant reacceleration, followed by San Francisco and Los Angeles.

Cleveland and Chicago led the nation with the largest monthly gains, at 1.5% and 1.4%, respectively. In contrast, San Francisco, Denver, and Tampa, Florida recorded the smallest gains, all below 0.5%. It's important to note that while Chicago and Miami saw substantial increases in June, the gains in slower-growing metros align with historical seasonal patterns for the May to June timeframe.

Price Tier Analysis

When analyzing price tiers, the high tier continued to exhibit relative weakness, experiencing a -2.6% year-over-year decline, marking the fourth consecutive month of annual declines. This trend aligns with observations in CoreLogic's Single-Family Rent Index and may be attributed to the greater mobility of higher-income households during the pandemic, which has since slowed.

Additionally, the surge in demand for luxury and second homes in 2021 and 2022 has tapered off due to increasing mortgage rates and slowing home sales. However, some markets, such as Atlanta and New York, have displayed strength in the high-tier segment in recent months, both experiencing 1.5% month-over-month increases.

Conversely, the low-priced tier in Tampa reported no price growth from the previous month, indicating variations in price performance across different market segments.

The data from the CoreLogic S&P Case-Shiller Index for June 2023 paints a dynamic picture of the US housing market. While challenges like elevated mortgage rates are impacting buyer behavior and moderating price gains, the market continues to show resilience and adaptability. Regional variations in price growth, as well as disparities across price tiers, highlight the complexity of the real estate landscape. As we progress through the year, it will be crucial to monitor these evolving trends and market shifts, providing valuable insights for both buyers and sellers.

About CoreLogic

CoreLogic is a leading global property information, analytics, and data-enabled solutions provider. The company’s combined data from public, contributory, and proprietary sources includes over 4.5 billion records spanning over 50 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk, and related performance information.

The CoreLogic HPI™ is built on industry-leading public record, servicing, and securities real-estate databases and incorporates more than 40 years of repeat-sales transactions for analyzing home price trends. Generally released on the first Tuesday of each month with an average five-week lag, the CoreLogic HPI is designed to provide an early indication of home price trends by market segment and for the “Single-Family Combined” tier, representing the most comprehensive set of properties, including all sales for single-family attached and single-family detached properties.

CoreLogic HPI Forecasts™ is based on a two-stage, error-correction econometric model that combines the equilibrium home price—as a function of real disposable income per capita—with short-run fluctuations caused by market momentum, mean-reversion, and exogenous economic shocks like changes in the unemployment rate.

Source: https://www.corelogic.com/category/intelligence/reports/home-price-insights/

Is It a Buyer’s or Seller’s Market in 2023?

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Is It a Buyer's or Seller's Market?

Is it a Seller’s Market in 2023

The housing market has been through its share of ups and downs, but one thing remains clear: 2023 is still a seller's market. In this article, we'll explore the reasons behind this, the advantages it offers to sellers, and the current state of housing inventory.

The State of Housing Inventory

The latest Existing Home Sales Report from the National Association of Realtors (NAR) reveals that the supply of homes for sale is incredibly low. Housing inventory is typically measured in two ways: the number of available homes on the market and months' supply, indicating how long it would take to sell all available homes based on current demand.

In a balanced market, there's typically a six-month supply of homes. However, today's reality is quite different. Currently, we have only about 3 months' supply of homes at the current sales pace.

Clearly, the current housing inventory situation still indicates a seller's market. We are far from what's considered a balanced market, with the current months' supply being half of what's typical in a normal market. This shortage of homes aligns with today's strong buyer demand, as Lawrence Yun, Chief Economist for NAR, points out:

“There are simply not enough homes for sale. The market can easily absorb a doubling of inventory.”

Examining Months Supply for Existing Single Family Homes in July 2023

One crucial metric that provides insight into the current state of the housing market is the months' supply of homes. This figure represents the number of months it would take to sell all available homes on the market based on the current level of demand. In this section, we'll delve into the months' supply data for existing single-family homes in July 2023.

Before we dive into the current numbers, it's valuable to review the historical trend to understand the context. Here's a look at the months' supply figures for the past year:

Year Month Months Supply
2022 June 2.7
2022 July 2.9
2022 August 3.0
2022 September 3.0
2022 October 3.2
2022 November 3.4
2022 December 3.5
2023 January 3.4
2023 February 2.9
2023 March 2.8
2023 April 2.8
2023 May 2.8
2023 June 2.8
2023 July 2.9

This data reveals a consistent pattern of low months' supply, indicating a prolonged seller's market. In July 2023, the months' supply for existing single-family homes stands at 2.9. It's important to note that this figure is seasonally adjusted to account for fluctuations in supply and demand throughout the year.

This seasonally adjusted supply, when compared to seasonally adjusted sales, paints a clear picture of the market dynamics. The fact that the supply remains below the three-month mark signifies the ongoing shortage of available homes relative to buyer demand.

These numbers reaffirm that 2023 continues to be a seller's market, with limited inventory contributing to favorable conditions for those looking to sell their homes. Sellers can expect their properties to remain in high demand, making it an opportune time to list their homes and potentially secure competitive offers.

Advantages of Being in a Seller’s Market

So, what does this seller's market mean for you as a seller? It's a golden opportunity. At this moment, there are buyers who are ready, willing, and able to purchase a home. With a scarcity of homes on the market, any property that gets listed becomes a magnet for these eager buyers.

If you collaborate with a local real estate agent to list your house now, and ensure it's in good condition and priced right, you could attract a lot of attention and potentially receive multiple offers. The market is in your favor, and it's a chance to maximize your returns.

The Current Market Trends

Looking at recent data, the trends continue to support the notion of a seller's market. National Association of Realtors® reported that the inventory of unsold existing homes increased slightly by 3.7% from the previous month to 1.11 million at the end of July, equivalent to 3.3 months' supply at the current monthly sales pace. This indicates a persistently low inventory of homes.

New listings, a measure of homes being put up for sale, have been declining for 60 weeks, with this week showing a 3.1 percentage point widening compared to the previous week. Despite some potential inventory gains this fall, fresh listings remain more than 20% below pre-pandemic levels for this time of year.

Active inventory has also declined, trailing behind the previous year by 5.9%, marking the 10th consecutive decline. While pending home sales have increased, existing home sales are expected to remain relatively stifled in 2023, with a projected 5% dip in for-sale inventory compared to 2022.

Conclusion

In conclusion, 2023 continues to be a seller's market due to the low supply of homes for sale. This presents an excellent opportunity for sellers to capitalize on the strong demand from eager buyers. If you're considering selling your home, now is a favorable time to connect with a local real estate agent and make the most of this advantageous market situation.

References

  • https://www.nar.realtor/research-and-statistics/housing-statistics
  • https://www.realtor.com/research/tag/months-supply/
  • https://www.noradarealestate.com/blog/housing-market-predictions/

Goldman Sachs Housing Market Forecast: Will it Crash?

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Goldman Sachs Housing Market Forecast

The housing market in the United States has been a rollercoaster ride in recent years, with unpredictable shifts that have left homeowners and buyers alike uncertain about what to expect. The latest forecast from Goldman Sachs is no exception, predicting a significant decline in home prices in some of the biggest cities in the country.

According to a recent note to clients, Goldman Sachs analysts predict that by the end of 2024, home prices will plunge by 19% in Austin, 16% in Phoenix, 15% in San Francisco, and 12% in Seattle. The reason for this sharp decline in home prices is due to an oversupply of housing in these metropolitan areas, which has overwhelmed demand.

“While overall levels of housing inventory remain tighter than pre-pandemic levels, some vulnerable metropolitan areas have seen supply increase rapidly. Unsurprisingly, our home price appreciation forecasts have been most negative for geographies where supply is starting to overwhelm demand,” wrote Lotfi Karoui, Vinay Viswanathan, and Ronnie Walker, the authors of the note.

The report has sparked concern among homeowners in these areas, who are understandably worried about what the future holds for their investments. However, the analysts at Goldman Sachs emphasize that the anticipated decline in housing prices in these metropolitan areas is not reflective of a broader trend in the housing market.

In particular, the analysts note that San Francisco and Austin are home to major tech firms, including Amazon, Apple, Google, and Facebook, that has been at the forefront of industry-wide layoffs. The oversupply of housing in these areas is primarily due to local challenges, including poor levels of affordability, pandemic-related distortions, and a high concentration of employment in the technology industry.

The report from Goldman Sachs is not the first to predict a decline in the housing market. In an earlier note, the bank suggested that home prices nationwide could fall around 6% from their peak before bottoming out sometime in the next six months as a result of higher mortgage rates.

“The sharpest declines for the U.S. housing market are now behind us,” the strategists, led by Goldman chief economist Jan Hatzius, said in the January note.

The housing market has been sensitive to changes in interest rates, and the Federal Reserve's aggressive campaign to tighten policy and slow the economy has had a significant impact. Policymakers have already lifted the benchmark federal funds rate eight consecutive times and have signaled their intention to continue raising rates higher this year as they try to crush inflation that is still running abnormally high.

Mortgage rates have fallen from their peak of 7.08% in November but have recently reversed that trend and started to march higher amid interest rate-hike fears. The average rate for a 30-year fixed mortgage climbed to 6.65% this week, according to data from mortgage lender Freddie Mac.

That remains significantly higher than just one year ago when rates hovered around 3.76%. This rise in mortgage rates has contributed to the decline in the housing market, as it makes buying a home less affordable for many Americans.

Despite the concerns raised by the report from Goldman Sachs, other economists have predicted even steeper declines in the housing market. Ian Shepherdson, the chief economist at Pantheon Macroeconomics, warned that home prices could tumble as much as 20% from their peak.

It's clear that the housing market is in a state of flux, with many different factors contributing to the uncertainty. However, there are also some positive signs on the horizon that may help to stabilize the market in the coming years.

For example, the Biden administration has proposed a $15,000 tax credit for first-time homebuyers, which could make it easier for many Americans to afford a home. This proposal is part of a broader plan to tackle the affordable housing crisis in the United States, which has become a major issue in recent years.

In addition to the proposed tax credit, the administration has also unveiled plans to invest $318 billion in affordable housing over the next ten years. This investment will help to create new affordable housing units, rehabilitate existing units, and provide rental assistance to families in need.

These initiatives could help to boost demand for housing in some of the metropolitan areas that are currently oversupplied. However, it's important to note that the impact of these policies will take time to be felt in the housing market. In the short term, the market is likely to remain volatile, with unpredictable shifts in supply and demand.

Another factor that could impact the housing market in the coming years is the ongoing COVID-19 pandemic. The pandemic has had a major impact on the economy, with millions of Americans losing their jobs and struggling to make ends meet. Many homeowners have been forced to sell their homes or face foreclosure as a result.

However, the rollout of vaccines and the easing of restrictions in many parts of the country could help to boost the economy and stabilize the housing market. If the pandemic is brought under control and the economy begins to recover, we could see an increase in demand for housing in many parts of the country.

Ultimately, the housing market is a complex and constantly evolving ecosystem that is influenced by a wide range of factors. While the latest forecast from Goldman Sachs may be concerning for homeowners in some metropolitan areas, it's important to remember that this is just one prediction among many.

Other economists have predicted different outcomes for the housing market, and it's impossible to know for sure what the future holds. However, by staying informed about the latest trends and developments in the market, homeowners and buyers can make informed decisions about their investments and take steps to protect themselves against potential risks.

In conclusion, the housing market in the United States is currently in a state of flux, with unpredictable shifts in supply and demand. The latest forecast from Goldman Sachs predicts a significant decline in home prices in some of the biggest cities in the country, due to an oversupply of housing that has overwhelmed demand.

However, this is just one prediction among many, and it's important to consider a wide range of factors when assessing the state of the housing market. Initiatives like the proposed tax credit for first-time homebuyers and the investment in affordable housing could help to boost demand in some areas, while the ongoing COVID-19 pandemic could continue to impact the market in unpredictable ways.

By staying informed about the latest trends and developments in the market, homeowners and buyers can make informed decisions about their investments and take steps to protect themselves against potential risks.

More Insight on the Global & US Housing Market Forecast

According to Goldman Sachs Research, higher mortgage rates are causing housing markets around the world to slow down. After a surge in housing activity during the pandemic, home sales have pulled back sharply in the second half of 2022 due to the spike in mortgage rates enacted by central banks in most developed market economies. This contraction in housing starts, sales, and prices has persisted in 2023 and is expected to continue throughout the year.

The report suggests that the impact of higher borrowing costs for homebuyers has yet to be fully felt and that the global housing market may not have reached its bottom. The GS Research team estimates that each 100-basis-point rise in mortgage rates leads to a 6% decline in residential fixed investment after three or four quarters and a 2.5% drop in house prices after 10 quarters.

The timing of the impact varies across countries due to differences in mortgage markets. Countries with higher shares of fixed-rate mortgages tend to experience delayed rate impacts. Since mortgage rates have only recently peaked in most countries and could be headed higher still, the global housing market may not have found its bottom yet.

The report predicts significant peak-to-trough home price declines in developed markets where housing affordability plunged following the pandemic, including New Zealand (-19%), Canada (-19%), Sweden (-17%), and Australia (-15%). Developed markets that will likely see flat or moderate declines include Italy (-2% peak to trough), France (-4%), and Switzerland (-6%), reflecting a slower increase in mortgage rates and “less stretched” affordability.

The US housing market is expected to see “relatively tame” home price declines of around 5%, owing mainly to its extremely low vacancy rate.

Overall, the authors of the report believe that the housing declines around the globe are going “according to plan.” The strong housing market response to rate hikes has helped slow overall growth below trend without causing a recession or triggering a rise in delinquencies in most major economies. They anticipate that this pattern will continue.

Country Peak-to-Trough Home Price Decline
United States -5%
New Zealand -19%
Canada -19%
Sweden -17%
Australia -15%
Switzerland -6%
France -4%
Italy -2%

References/Sources:

  • https://www.goldmansachs.com/insights/pages/why-the-global-housing-market-has-further-to-slide.html
  • https://www.foxbusiness.com/economy/home-prices-could-face-double-digit-drop-cities-goldman-sachs-warns
  • https://news.yahoo.com/these-four-cities-could-see-double-digit-home-price-drops-goldman-sachs-204112309.html

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