BAM’s Key Details:
- A Redfin report reveals the 10 markets where home price growth is decelerating the fastest
- Pandemic boomtowns and tech hubs like Austin, Phoenix, and San Jose are seeing the biggest declines in annual home price growth
- Only five of the 99 metros in the analysis saw an acceleration in home price growth
A new report from Redfin highlights the ten U.S. metros where home price declaration is slowing the fastest. Not surprisingly, these areas were hugely popular during the pandemic, when out-of-town buyers with big budgets moved to relatively affordable markets, driving up prices.
Today’s high mortgage rates and economic uncertainty have deterred buyers and sellers alike, slowing home price growth, with the biggest deceleration happening in the ten metros shared below.
Boomtowns are seeing the biggest drops in home price growth
Pandemic boomtowns, including Austin and Phoenix, saw the biggest drops in home price growth.
Both were hugely popular during the pandemic buying frenzy, as remote workers migrated from expensive coastal metros to relatively affordable Sun Belt destinations.
And this year, both metros saw 23% drops in home price growth from February 2022, when the housing market was near its peak, to October 2022. These were the steepest declines among the 99 most populous metros in Redfin’s report.
Top ten metros where home price growth is slowing the fastest
The following table from Redfin’s report lists the top ten metros with the fastest deceleration in home price growth.
Phoenix, Austin, and Las Vegas were among the metros that saw the biggest net inflow of new residents in 2021. Phoenix, Las Vegas, and Sacramento have all consistently ranked on Redfin’s list of most popular migration destinations.
Boise (and its suburbs) has been one of the fastest-growing metros in the U.S. over the last few years, drawing many new residents from California.
Out-of-town homebuyers with big budgets helped drive up home prices in these markets in 2021 and 2022. Home prices have jumped more than 30% over the last two years in Phoenix, Austin, and Boise, with the typical home price hovering around $500,000 in all three.
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. 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.
Migration and investment are down
Austin Redfin agent Maggie Ruiz credits the pandemic buying frenzy with driving up home prices so much they’ve become unaffordable for many locals.
However, she’s recently noticed a significant decline in investment purchases and migration into the area. So, while affordability is still an issue, some first-time buyers have a real shot at purchasing a home without competing with investors and out-of-towners.
West coast tech hubs are also seeing a rapid declaration
Home price growth is also decelerating rapidly in tech hubs like San Jose, Oakland, and Seattle—all on the top 10 list, and all feeling the pain of high mortgage rates and plummeting tech stocks more than most.
In San Jose, the median price per square foot fell about 2% year over year in October, down from 20% year-over-year growth in February, placing it third on the list.
With high mortgage rates and prices still at the high end, double-digit growth in home prices is unsustainable.
Price growth is accelerating in five of the 99 metros
Five of the 99 meteors in Redfin’s analysis actually saw an acceleration in price growth. Three of those five are on the East Coast, one is in the Midwest, and one is in Texas.
The median price per square foot increased 11.2% year-over-year in Albany, NY, in October—up from a 2.8% bump in February. That’s the biggest percentage point increase of all the metros in Redfin’s analysis.
Taking second place, Bridgeport, CT, saw its median price per square foot increase 7.5% year over year in October—up from 4% in February. McAllen, TX, saw its median price per square foot rise 18.7% year-over-year in October, up from 16.1% in February.
All five metros that saw an acceleration in home price growth are affordable and relatively stable markets. Four out of the five have median home prices lower than the national median, with Bridgeport, CT, as the exception.
Home prices in these metros grew during the pandemic but to a lesser degree than much of the rest of the country, leaving less room for prices to fall. Places like Milwaukee and Albany feel the impact of high mortgage rates less than metros with higher median home prices.
Top takeaways for real estate agents
If you’re serving one of the metros in Redfin’s top ten list, share this data with your buyer clients to show them their advantages in the current market. Encourage them to negotiate for lower prices, rate buydowns, and any concessions related to a full home inspection.
Sellers in the five metros with accelerating home prices are better positioned to sell their homes at or above their asking price. Help them set a price that will attract buyers and make those over-ask bids more likely.
Be the agent that can see the advantages in every market. And help your clients make the most of them.