In many cities across the country, homes are selling for tens of thousands of dollars less – sometimes hundreds of thousands of dollars less – than they did a year ago.
In San Francisco, the median selling price was $220,000 lower than the same point last year — the largest decline by dollar amount — and eroded 13.4% of equity. Prices saw the largest percentage drop in Oakland, California, where they fell 16.1%, or $174,500 less, year over year, according to data released by Redfin.
The other notable declines occurred in Austin, Texas, where median prices fell 15.3%, or $85,000; Boise, Idaho, where prices fell 15.1% or $80,000; and Salt Lake City, where the median fell 10.9%, or $60,000.
The declines reflect both macroeconomic elements, such as higher mortgage rates and a recession outlook, as well as local factors that are reversing some of the sharp rises in prices seen in recent years.
“Home prices are moderating, pending sales remain stable and properties that were on the market last month are selling closer to list price. These are all signs that the market is still in balance and is doing so in a healthy way,” Ashley Jackson, 2023 Austin Board of Realtors, was quoted as saying in its recent press release.
A large master plan suburban housing development near Pflugerville, Texas about 20 miles north of downtown Austin.
Prices in the cities are three to four times lower than the national average
Average U.S. home prices in April fell 4.1% year over year, or $17,603, to $408,031, according to Redfin. In dollar terms, it’s the biggest drop on record and the biggest percentage drop since January 2012. April marked the third consecutive month of year-on-year declines after around a decade of gains.
However, the nationwide drop of $17,603 year over year is statistically different than what San Francisco, Oakland, Austin or Boise are experiencing. Discounts in these cities are four to five times the national average of 4.1%.
“Home prices are rising this spring as supply for sale remains tight, but there are a number of markets where prices remain below their recent highs,” wrote Andy Walden, vice president of Black Knight, a mortgage technology and data provider. to Yahoo Finance. “This is happening mainly along the West Coast and in the so-called ‘pandemic boomtowns,’ which have seen significant influxes of immigrants during Covid.”
Prices in tech cities are falling
Though San Francisco has limited inventory and new construction, declining wealth and demand are weighing even more heavily on the real estate market there and in neighboring cities.
The number of completed sales, or final transfers of ownership from seller to buyer, has nearly halved across the Bay Area in recent months. For example, according to Redfin, closing deals in April fell 48.2% year over year in San Jose, 44% in San Francisco, 43% in Stockton, and 42.8% in Oakland.
Two residential units for sale in San Francisco. (REUTERS/Robert Galbraith)
“So we have this combination of macroeconomic factors that impacted every place in the country, like, B. rising interest rates and so on,” Patrick Carlisle, senior market analyst at Compass in San Francisco, previously told Yahoo Finance. “And then you have it.” These very specific factors like layoffs in high-tech, the highest real estate prices in the country, and working from home impacted our industries more than others.”
Pandemic boomtowns broke
Aside from high interest rates and a weak real estate market, average prices in Austin are falling from near all-time highs.
At the height of the COVID housing boom, Austin prices soared. The city’s average home prices rose 40% in a year, compared to an 18.6% average increase for US homes. Prices rose to $590,000 in June 2021, up 42.2% year-on-year. But that’s not all. Average prices continued to rise in 2021 and 2022, reaching $670,000 in May last year. That represented a nearly 74% increase in two years, compared to prices of $385,000 in January 2020, two months before the pandemic hit the country.
“Austin was overpriced last year so there was definitely a correction coming,” said Daryl Fairweather, Redfin’s chief economist.
The rising costs caught up with the city. According to data released by Movebuddha, Austin experienced a net emigration pattern in September 2022 (0.94) and ended the year with only a slight increase (1.26).
The supply is also approaching a healthier level. According to the Austin Board of Realtors, the city of Austin’s housing stock increased 3.2 months in April compared to 0.7 months a year ago. Although a balanced market should have six months of inventory, the city of Austin’s inventory is above the state average of 2.6 months. It looks like supply will only increase if luxury properties start to pile up.
“Markets like Austin, which are seeing the largest drop in home prices, are also among a very small handful where inventories have returned close to pre-pandemic levels,” Walden said.
Foothills neighborhood in North Boise, Idaho
Buyers in the vibrant city known for its live music scene will now have to deal with significantly fewer multiple bids. According to Redfin, the proportion of offers that faced competing offers fell by six months in April from 72.4% to 36.3%.
Similarly, Boise — another boomtown during the pandemic — is seeing a reversal in fortunes.
Last year an analysis showed that Boise, Idaho and Austin, Texas had the most overpriced properties. Price history showed that homes in Boise should cost an average of about $299,202 in 2022, but they sold 72% more expensive at $516,548; According to data from Florida Atlantic University, homes in Austin sold for a price that was 67.70% higher.
Now, April upcoming sales in Boise are down 70.8% year over year, the highest of any metro city analyzed by Redfin. New listings in Boise were also down 50.2% in April, slightly behind Allentown, Pennsylvania’s 58%.
“Boise real estate values have shot too close to the sun during the pandemic,” Fairweather said, “and now with mortgage rates more than double what they were before, real estate values have bottomed again.”
Rebecca Chen is a reporter for Yahoo Finance and previously worked as a CPA for Investment Tax.
Click here for the latest business news and economic indicators to help you make investment decisions
Read the latest financial and business news from Yahoo Finance
