The good news for buyers is that there was a slight slowdown in house prices in May as higher interest rates continued to hold back demand in the booming housing market, according to industry data released Tuesday, and Experts say there is plenty of room for a downward trend - particularly in many residential pandemic hotspots.
House prices across the country rose 19.7% yoy in May, but fell from 20.4% a month earlier, according to carefully monitored S&P CoreLogic Case-Shiller indices after prices hit the maximum of 35 years in March.
Prices in the country's largest cities are also starting to drop, with the Case-Shiller 20-City Index, which measures prices in cities like New York, Los Angeles and San Francisco, up 20.5%, from 21 , 2% of the previous month.
"The market is adapting to a new reality," said Ian Shepherdson, chief economist at Pantheon Macro, in a release note, noting that the Case-Shiller index reflects data from two months ago and that recently sales volumes lower and larger shares the "current state of the market is much weaker".
Some markets will be more vulnerable to a downturn: In a report on Tuesday, Redfin senior economist Sheharyar Bokhari noted that home prices in many real estate hot spots rose at an "unsustainable pace" during the pandemic and warned that a recession could hurt profits. he in the end he unravels himself saying: "What goes up must come down.
While most homeowners are likely to remain on a solid footing, Bokhari notes that places where people tend to be highly indebted to their income and net worth are vulnerable because residents are more likely to seize or trade for. sell at a loss. As a result, Riverside, California has the best chance of seeing its market cool down during a recession, Redfin said, closely followed by areas such as Boise, Cape Coral, Florida, Las Vegas, Phoenix and Tampa, which have experienced higher annual numbers. Year-on-year earnings in the country's largest cities in May (which reaches 36.1%), according to S&P.
"The Boise market is already transforming as many of the people who moved to Idaho during the pandemic are either returning to their hometowns or are cashing in and moving to more convenient locations," said Redfin agent Shauna Pendleton in a Note. "I don't expect house prices to plummet, but at some point we have to come out of the clouds and sellers have to adjust their expectations to the new reality."
Historically high savings rates, government stimulus, and low interest rates helped fuel the home buying frenzy during the pandemic, but signs of a slowdown quickly emerged as the Fed embarked on its most aggressive rate hike cycle in recent years. two decades. With demand rapidly declining, the number of homes for sale nationwide saw its first annual increase since July 2019 last month, according to Redfin. "There are more homes on the market, fewer buyers, and a greater chance that buyers won't be able to afford the asking price because their monthly payments have gone up due to rising rates," Pendleton says.
Some markets are less likely to fall. Akron, Ohio is less likely to decline if the economy slides into recession, thanks to low house price volatility, a low debt-to-income ratio among residents, and a relatively cooler housing market, he reports. Redfin. Other lower risk areas are Philadelphia, Cleveland and Boston.