Homebuyers are finally taking advantage of the housing market, but where they can get the best discounts on home prices varies from metro to metro.
Some of the hottest post-pandemic boomtowns such as Phoenix and Seattle, as well as perennially popular West Coast cities such as San Jose and San Francisco, saw home price declines of more than 10% from their 2022 peaks, according to December data from mortgage technology and data provider is registered. Black Knight Inc. surpassed the national average decline of 5.3% from its June 2022 peaks.
This is a welcome sign for some buyers who are taking advantage of the new buying power and seller incentives in today’s market. Still, affordability remains a significant challenge this year, as rising home prices and still-high mortgage rates hold back demand.
“We’re finally seeing a real price correction,” John Downs, senior vice president at Vellum Mortgage, told Yahoo Finance. “House prices remain high, but they are better now and falling.”
Overvalued markets will see the sharpest decline
After a nearly 7% increase in mortgage rates last year, home price growth across the country has begun to decline. By December 2022, house prices had recorded their sixth consecutive monthly decline – and Black Knight predicts that the decline could extend into 2023.
The report found that nearly 14 of the 50 largest markets are already showing signs of a sharp decline, with home prices on a seasonally-adjusted basis declining an average of 6% or more from their 2022 peaks. Among the metros assessed, the prices declined at a faster rate in the west.
Black Knight data showed San Francisco took the lead, with a 13% decline in home prices in December 2022. It was followed by San Jose (down 12.7%), Seattle (down 11.3%), and Phoenix (down 10.5%).
A sign is posted in front of a new condominium for sale on December 19, 2022 in Los Angeles, California. (Credit: Mario Tama / Getty Images)
Still, home prices remain inflated for many homebuyers. For example, according to Realtor.com, the median home listing price in San Francisco at the end of the year was $1.3 million, which is still up 3.7% year over year. However, the average home sold for $1.25 million, or 3.8% above the median list price.
“Buyers, especially on the West Coast, know that Seattle has been a seller’s market for a decade, but they may have a short window to buy where they can use the incentive to buy and stay ahead of the competition.” Can exit,” Jeff Reynolds, broker Compass and founder of UrbanCondoSpaces.com told Yahoo Finance. “People would rather buy than wait until there is multiple offer competition again.”
Some markets will have a soft landing
However, some markets will see a marginal reduction in home prices.
According to Black Knight, only four of the top 50 markets did not experience a price drop, including Kansas City, Indianapolis, Virginia Beach and Louisville, while 20 markets saw price drops of up to 2%. Twelve metros saw a decline of between 3% and 5% from their peak.
A separate report by Goldman Sachs found that areas with greater affordability – where the monthly payment on a new mortgage costs roughly a quarter of monthly income, such as in Philadelphia or Chicago – have higher home prices than more expensive ones. A soft pullback is likely to be seen. Market. By comparison, in the West, mortgage payments claim three-quarters of monthly income, Goldman Sachs found.
“If you’re a first-time buyer in a market like Washington, D.C., you know the last three years have been really crazy,” Downs said. “But prices are finally coming down.”
No ‘catastrophic fall’ in house prices
A “reduce” sign sits in the front yard of a home for sale in Northeast Washington, DC. (Credit: Drew Enger / Getty Images)
According to Fannie Mae senior vice president and chief economist Doug Duncan, home prices will fall 6.7% over the next two years, but won’t be the “catastrophic decline” seen during the Great Recession.
The main concern for many economists and housing experts is affordability.
According to Black Knight estimates, the national pay-to-income ratio is 34.8%. While it is down from 38.4% in October 2022, it is above the peak level seen before the Great Recession in 2006.
That means it now takes $600, or 41% more, to make the monthly payment for a 30-year mortgage on a median-priced home after downsizing 20% than it did a year ago.
“The important question is what happens to household income now. If they hold strong and if employment remains fair, eventually there will be an adjustment of the relative relationship between income, mortgage rates and home prices that will allow consumers to get back in the game,” Duncan told Yahoo Finance. “It could happen this year. Our theme is – it’s all about affordability.”
Gabriella is a Personal Finance Reporter at Yahoo Finance. follow him on twitter @__gabriellacruz,
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