Where it’s Hot and Where it’s Not
The Real Estate market in America is both crashing and surging at the same time. There are pockets of prosperity and sections of poverty from Coast to Coast (but rarely on the coast itself). Frankly, this conundrum has never happened in the history of the real estate market, and the way you are affected all depends on where you live. For example, prices are jumping slightly on the East, particularly the Southeast…but experiencing a moderate drop on the West Coast and Southwest.
The key factors that influence pricing across the board are; mortgage interest rates, appraised home values, consumer confidence and home supply/demand. In this article I will try to briefly touch on all these ingredients and their impact on the real estate market.
Some market analysts say that mortgage rates could fall as low as 5% this year, but my prophesy is closer to 5.5% (at the lowest point). Whether 5, 5.25 or 5.5 percent, it is highly unlikely that will have a big enough impact to significantly boost home sales. Price trends however, are only partially impacted by the higher interest rates. When there is very high inventory for example (a natural occurring element of high interest rates), then lower prices-values follow suit. Setting aside America’s heartland in particular (for example Omaha and Oklahoma City), here is a general ‘brushstroke’ and recap of how the country did over the past year:
From January 2022 to January 2023, home prices fell 7.5% in Seattle and dropped 10.3% in San Francisco. At the same time, home prices surged 12% in Miami and jumped 9.3% in Orlando. Even Buffalo, NY saw home price values rise 8.3% on an annual basis in January. Except for Austin, TX — 37 of the biggest metro areas East of Colorado saw home prices rise year-over-year in January. Meanwhile, all 12 of the major R.E. markets West of TX saw home prices fall over the same time period.
As mentioned earlier, this type of split situation in the US housing market is unprecedented, even when compared to the Mortgage Meltdown of 2008–09. During that catastrophe, home prices dropped in 134 out of the 153 metropolitan areas. The 19 major cities that did not drop (circa 2009), simply remained flat but did not increase in value. As we fast forward to today, a good economist will…