The housing market is rebalancing after the most competitive and frenetic period in recent memory. The cooling trend that is engulfing the market is expected to continue with more cities seeing home prices decline by this time next year as the shift to a buyer’s market persists, according to the Knock Buyer-Seller Market Index released today.
The index, which analyzes key housing market metrics to measure the degree to which the nation’s 100 largest markets favor home buyers or sellers, found home prices in 98 markets in September were below their peak price last spring. Providence, Rhode Island and Salisbury, Maryland were the only markets where home prices have remained at their peaks set earlier this year.
Home prices in 42 major housing markets are projected to fall further from their 2022 record highs by September 2023. Fifteen of those markets are in the South, including three of the 10 markets with the largest forecasted price drops. Fifteen are in the West — home to some of the most expensive markets in the nation. The remaining 12 markets forecasting prices below this summer’s peak are in the Midwest and Northeast, respectively. Bridgeport, Connecticut, is forecasted to see the largest price drop (-7.8%), while Springfield, Missouri, will lead the Midwest with a projected price decline of 3.9%.
The top 10 markets with forecasted price drops 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, Texas (-9.3%); Oxnard, California (-9.3%); New Orleans (-9.3%) and Ogden, Utah (-8.3%).
Fifteen markets saw prices drop by 10% or more in September from their price peaks, which were set between April and June. Seven of those markets are in the West, another seven are in the South and just one, Bridgeport, Connecticut, is in the Northeast. Reno, Nevada, Winston-Salem, North Carolina and Boise City, Idaho saw the biggest declines from their peak prices, falling 14%, 13.1% and 13.1%, respectively.
In 15 of the 25 markets with the largest projected median sale price declines, prices peaked at 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 to the sidelines, just over 1.8 million homes had traded hands across the nation’s largest 100 housing markets through the first nine months of 2022 — less than during the same time frame in each of the past four years. Although still low, the supply of homes for sale has grown steadily throughout 2022 as median days on market increased to 20 in September – up by one full week from a year ago.
The average sale-to-list ratio, which measures how close homes are selling 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 nation.
Knock co-founder and CEO Sean Black said that based on the findings, the shift to a more balanced market is still in its early stages. “We expect that this much-needed reset will persist through much of 2023, and although prices will again begin to rebound they likely won’t return to their peaks for the foreseeable future,” he said.
Black explained, “While many drivers of the housing market like demographics and record low unemployment have not changed, the combination of higher rates and home prices have put affordability at the worst levels in 30 years with entry-level monthly payments set to be 34% higher in 2022 versus 2021. The good news is that as prices soften and rates stabilize once the Fed is done with its aggressive rate hike campaign—hopefully, after its meeting in November—buyers will be ready to re-enter the market and sellers will retain the majority of the equity gains they’ve seen in the last two years.”
Nationally, the median home price was up 6.6% to $388,000 year-over-year in September, but down 5.4% from its peak of $410,000 in May. Although seasonality plays a factor 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 the 15 markets will grow year-over-year, but are expected to remain below their 2022 peak pricing 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 projected to decline further by this time next year.
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