From all-time highs, home prices are beginning to drop, and it’s not just in the Sun Belt. One economist says that doesn’t mean a real estate crash is coming.
The drop in global stock markets earlier this week made people more worried about a recession and led to more rumors that a home crash was coming soon.
CoreLogic, a real estate analytics business, says that due to high mortgage rates that have made it harder for people to buy homes, home prices have been going down.
CoreLogic’s chief economist Selma Hepp told MarketWatch that home prices will continue to rise, though at a slower rate. This is similar to how the stock market rose on Thursday after new jobs data calmed investors’ worries.
Hepp said that home prices across the country only went up 0.3% between May and June, which was a lot less than the average of 0.8% during the same time period before the pandemic.
CoreLogic said that high mortgage rates are making it harder for buyers to buy homes, which is why home price growth is slowing down.
Hepp told MarketWatch that it’s hard to say if buyers will come back to the market now that inventory is still low in many places, even though rates have dropped a lot in the last week.
“With the prices of homes being so high, how many more people can afford them at this level?” She said.
The number of mortgage applications barely went up last week, even though rates dropped a lot, according to statistics from the Mortgage Bankers Association.
CoreLogic said that because home prices went up over the past year, South Dakota, New Jersey, and Rhode Island had the biggest increases. In June, South Dakota saw home prices go up 10%, 9.3%, and 9.2%, respectively. No states showed yearly drops.
Price growth is slowing or even stopping in many big cities because there are too many homes for sale compared to people who want to buy them. Home prices dropped by 1.55% in Austin-Round Rock, Texas, from May to June. In Charleston-North Charleston, S.C., prices dropped by 1.22%.
“There is more inventory from both new construction and existing homes being put on the market,” Hepp said. “That’s reducing that pressure on prices” in many parts of the South, like Austin. “It wasn’t a market crash, though.”
The chart below shows that the number of live for-sale listings in Austin is much higher than it was before the pandemic. Hepp said that Austin is “resetting” instead of having a crash because it had one of the best home markets during the pandemic.
These are top three metropolitan areas where home prices fell the most in June, as compared with the month before, according to CoreLogic:
- Austin-Round Rock, Texas. Prices fell by 1.55% in June. The average value of a home in Austin was $544,600 as of June, and in Round Rock it was $466,000, according to an estimate from real-estate company Zillow
- Z18.27%.
- Charleston-North Charleston, S.C. Prices fell by 1.22% in June. The average value of a home in Charleston was $567,600 as of June, and in North Charleston it was $309,800.
- Allentown-Bethlehem-Easton, Pa.-N.J. Prices fell by 1.08% in June. The average value of a home in Allentown was $286,400, in Bethlehem it was $332,300 and in Easton it was $348,000.
On the flip side, some markets continue to see home prices growing on a month-to-month basis. In Miami, where many buyers purchase homes with cash rather than relying on mortgages for financing, prices in June rose 1.42% from the previous month, CoreLogic data showed.
These are the top three metropolitan areas where home prices rose the most in June as compared with the month before, according to CoreLogic:
- Miami-Miami Beach-Kendall, Fla. Prices rose by 1.42% in June. The average value of a home in Miami was $581,500, according to Zillow. In Miami Beach it was $537,300, and in Kendall it was $527,000.
- Chicago-Naperville-Arlington Heights, Ill. Prices rose by 1.33% in June. The average value of a home in Chicago was $303,000, in Naperville it was $575,700 and in Arlington Heights it was $439,300.
- Toledo, Ohio. Prices rose by 1.33% in June. The average value of a home in Toledo was $124,500.
