Some of the steepest decreases are in Sun Belt destinations. "I initially thought the Bay Area market wouldn't see much price decline due to lack of inventory, but it seems I may have been wrong.Ironically enough, they tend to be the areas that fully dominated the real estate market during the COVID-19 pandemic, with big influxes of new residents from more expensive parts of the country looking for more affordable homes and investors competing with them. "We've definitely seen a drop in sale prices over the last two months due to the double whammy of the Nasdaq correction and rise in interest rates," Kevin Chiao, a broker in the Bay Area, tells Fortune. It remains to be seen if those price drops will last long enough for the market to actually get a year-over-year negative reading in 2023. Prices are already falling in the Bay Area on a month-over-month basis. In some of these at-risk markets, including San Francisco, that home price "top" might have already been blown-off. That "very high" grouping also includes several small and mid-sized markets along the West Coast and in the Northeast. That includes major markets like Boise, Philadelphia, and San Francisco. CoreLogic categorized 28 regional housing markets as having a "very high" likelihood of a house price drop over the coming year. Another 145 housing markets landed in the "low" group, 65 markets qualified for the "medium" group, and 70 markets were in the "high" group. Of those 392 regional housing markets that CoreLogic measured, 84 markets in July were in the "very low" risk grouping. Already, markets like Boise and Phoenix are contracting significantly faster than the rest of the nation. Regardless of where national house prices go next, it won’t be even across the nation. ( Freddie Mac disagrees and says national house prices are set to rise another 4.4%.) By this time next year, McBride predicts home prices could be up 0% on a year-over-year basis. The real story, industry insiders say, is one of sharp decelerating price growth. National Home Price Index will report home prices grew at a double-digit rate between May 2021 and May 2022. housing market has entered into a recession, it raises the question: What’s coming next for home prices? On Tuesday, the Case-Shiller U.S. However, he says, the weakening housing market tells us a Fed-induced recession could be on the horizon. McBride, who is a leading expert on housing cycles, doesn’t think a broad U.S. “It is not the target, but it is essentially the target.” “The most frequent way we enter into recession is the Fed raises rates to fight inflation … the leading indicator for this type of recession is housing,” Bill McBride, author of the blog Calculated Risk, tells Fortune. As economic contractions spread throughout the economy, it should help to chip away at inflation. Soon, it’ll see cutbacks in durable good production, like window production, and cutbacks in commodities like lumber and steel. It’s already causing layoffs in sectors like homebuilding and mortgage lending. The subsequent decline in home sales creates economic contractions across the economy. The Federal Reserve put upward pressure on mortgage rates as a way to temporarily sideline homebuyers. Heading forward, the housing market will continue to slow.
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