The Weather Is Cooling Off And So Are These 20 Housing Markets

 

 

Redfin's most recent data shows that the housing market is slowing down in a number of significant American cities. According to the number of house sales, home prices, supply and demand ratio, and the amount of time it took for a listing to reach the pending sale stage, the top 20 U.S. hotspots were included in the research.

 

The most recent study reveals a sharp reversal in direction for many important U.S. home markets after two years of data that broke records. Notably, homebuyers turned off by the high property prices that are now coupled with quickly rising mortgage rates are finding the cities that led the pandemic-fueled home buying frenzy to be less and less desirable.

 

Real estate investors have good reason to be concerned about the most recent information and news reports regarding the housing slump. What response should you make to this?

 

The West Coast is Experiencing the Quickest Slowdown

 

The decline in well-known west coast home markets is the most evident conclusion. Seattle in particular is going through the worst slump, with home sales down 34% y/y as of August. It stands in stark contrast to the 23% growth in the city's house sales volume that occurred as recently as February 2022, which serves as an indication of how swiftly things have changed.

 

Seattle is not a one-off instance either. Similar declines in buyer interest and, consequently, property prices, are occurring in a number of California's major cities. Home prices are falling by double digit percentages in Sacramento, San Jose, San Francisco, and San Diego. The 20 markets that, according to Redfin, are cooling off the quickest are shown below.

 

The west coast has long struggled with rising unaffordability; the pandemic did nothing more than intensify a pre-existing tendency. Given that the usual mortgage interest rate is about twice what it was at the beginning of the year, it is not unexpected that purchasers are already feeling the pinch from high housing prices and are now rethinking buying in these locations.

 

"These are all regions where homebuyers are experiencing the sting of rising housing prices, higher mortgage rates, and very fast inflation," claims Redfin Chief Economist Daryl Fairweather. They are slowing down in part because of the high cost of living and in part due to the unsupportable heat created by the record-low rates last year.

 

Similar consequences can be seen in places that were major pandemic relocation destinations, including Phoenix, Arizona, and Las Vegas, Nevada. Over the past few years, these markets have frequently made news as the top destinations for professionals leaving California's pricey marketplaces. However, they are having the same problems this year. There is numerous evidence that purchasers no longer view these locations as attractive alternatives to overheated, pricey coastal markets since the housing markets in these metro areas quickly become overvalued.

 

For instance, typical property prices in Las Vegas reached a height of $440,000 this summer, up from $289,000 in February 2020. Since then, the median property price has dropped significantly to $405,000.

 

Phoenix, on the other hand, reached a high of $469,000 in May before dropping to $430,000. The median cost of a home in February 2020 was $279,000.

 

Does Now Make Sense For Investments?

 

There is no doubting that investing now necessitates a more careful and methodical approach due to the cooling housing market. According to Bloomberg, investors always instinctively draw back during a market slowdown, causing landlords to cancel leases and home flippers to liquidate their stock to reduce inventory.

 

Should you have to do this? No, not always. One thing to keep in mind about the housing market is that it is correct and not about to crash. Whether you decide to invest in long-term rental properties, short-term rentals, develop, etc., you can still make money with the right strategy.

 

In a buyer's market, it is important to think about buyer requirements and seller incentives that can entice potential buyers who might be wary given our increased interest rates.

 

Currently, it makes sense to look for cash buyers if you plan to flip houses, which is undoubtedly one of the trickier business models in a market that is declining. Glenn Kelman, CEO of Redfin, asserts that accepting lower bids is preferable to accruing interest fees and other carrying costs as listings sit in a weak market.

 

If you're an institutional landlord, you can decide to wait a bit before increasing your inventory. It all comes down to waiting for the ideal time when housing prices decrease even further. Institutional buys are opportunistic, as Moody's Analytics chief economist Mark Zandi told Bloomberg. They must be holding out in the hopes of receiving a far greater price for these homes in the near future.

 

Even while it would be simple to adopt a wait-and-see approach in 2023, there are still a lot of prospects in the home market. We are here because of it, Jacobs and Co. Real Estate to remain updated with the most recent information and tried-and-true methods for investing in real estate.

 

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JACOBS & CO. REAL ESTATE, LLC.

12923 Fitzwater Dr. Nokesville, VA 20155 

(703) 594-3800 | jacobsandco.com


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