The inconceivable is happening. After two-plus years of unimaginable and seemingly inexorable growth, home prices are falling from their heady peaks over the summer.
The reason: Higher mortgage interest rates have thinned out the ranks of buyers who can still qualify for a home loan and sharply reduced the price of the homes the remaining few in the market can afford. Gone are most of the frenzied bidding wars and six-figure offers over the asking prices. Homes are now sitting on the market longer, inventory is piling up, and sellers—at least in some markets—are cutting prices.
In some metropolitan areas, median list prices overall are falling from their June highs. These are the places where buyers can find relative deals compared with a few months earlier and where there are generally more homes for sale. The Realtor.com® data team rounded up these buyer-friendly housing markets.
Ironically enough, they tend to be the areas that fully dominated the real estate market during the COVID-19 pandemic, with big influxes of new residents from more expensive parts of the country looking for more affordable homes and investors competing with them. Some of the steepest decreases are in Sun Belt destinations.
These changes can be chalked up to more than just the price deceleration of this time of year, says Realtor.com Chief Economist Danielle Hale.
Prices generally “cool off as we move from the heat of the summer into the fall,” Hale says. “But this reflects more than seasonal cooling in prices.”
While the price declines are great for buyers, they’re causing sellers in these markets to sweat, as many begin to drop their asking price. But, nationally, prices are still up 14% since this time last year, even if they’ve dropped since early summer. And although home prices are down in these metros, when compared with the June peak, they’re all still up year over year.
“Home shoppers in these areas are probably excited to see these prices come down,” Hale says. “But to put it into context, it’s still above where it was last year.”
To figure out where home prices dropped the most, Realtor.com looked at the monthly median home list prices in the 100 largest metropolitan areas. Then we calculated the price change since June, when markets peaked nationally. Finally, we included only the metro with the biggest drop in any state, to ensure geographic diversity.
(Metros included the main city and surrounding towns, suburbs, and smaller urban areas.)
Ready? Let’s see if we can find you a bargain.
1. Austin, TX
Median home list price in September: $558,275
Change since June: -10.3%
Change since September 2021: +2.2%
Austin became the poster child for torrid housing market growth during the pandemic. Prices, sales, and incoming residents all skyrocketed. The city has become a tech hub in recent years, and the overall relative affordability of Texas has drawn newcomers from both coasts.
But, as the saying goes, what goes up must come down. After historic low inventories, more homes are now for sale. Prices dropped more than 10% in just the past three months, almost wiping out the gains seen over the past year. Austin is still up 2.2% year over year, but that’s the lowest remaining gain on the list.
The percentage of sellers in the metro area who slashed their list prices was up 252% in September compared with the previous year.
Paul Reddam, an Austin real estate agent with Homesville Realty Group at Compass, says sellers are feeling the effects of the greater inventory and lessening demand.
“Sellers are thinking, ‘Gee, this is painful,’” Reddam says. “We’re kind of seeing what we saw in 2001, when the dot-com bubble burst. We had a lot of people leaving at that time, and people didn’t want to sell because they were underwater.”
Reddam doesn’t think it’s all doom and gloom for the Austin housing market, though. He expects that, when prices hit new lows, investors and other cash buyers will step in.
“Big money is looking for the bottom,” he says. “They’ll start gobbling things up at a deal.”
2. Phoenix, AZ
Median home list price: $493,500
Change since June: -9.9%
Change since September 2021: +4.4%
Phoenix has been at the leading edge of real estate trends for years. During the pandemic, baby boomers, families, and investors flocked to the city, bidding up prices to mind-boggling new highs.
It was reminiscent of the ballooning real estate values in the mid-2000s, which culminated in the Valley of the Sun real estate market tanking harder than most other places in the Great Recession. And now, yet again, the Phoenix market is showing its proclivity to tumultuous ups and downs.
The number of homes coming on the market in the Phoenix metro area is down almost 10% in just the past three months, after climbing 20% in the prior year. However, even with the sharp downturn, prices are still up almost 5% year over year.
The area is full of investor-owners, who were often able to purchase with cash, in all likelihood causing some of the breakneck price growth.
For buyers, though, hefty markdowns can, at least to some degree, compensate a little for the higher price of a mortgage due to elevated rates.
This refinished, midcentury home near downtown is now under $500,000, after a $40,000 price reduction.
3. Palm Bay, FL
Median home list price: $379,995
Change since June: -8.9%
Change since September 2021: +5.8%
Florida was another pandemic hot spot. Businesses, baby boomers, and just about everyone else who was fed up with cold winters and high costs of living migrated to the Sunshine State, famed as much for its lack of income taxes as for its sandy beaches. Palm Bay, about an hour southeast of Orlando, along Florida’s Atlantic coast, absorbed some of those newbies.
The city sits halfway between Daytona Beach and West Palm Beach. It’s about $20,000 less expensive than Daytona Beach to the north, and more than $100,000 cheaper than the Miami and West Palm Beach areas to the south.
“It’s moving toward a buyer’s market,” says Joan Bradley, a Realtor® with One Sotheby’s International Realty in Palm Bay. She’s noted the disconnect between the industry’s expectations and reality.
“I don’t think the appraisers have caught up with the price changes either,” she says. “We still see some houses getting appraised higher than they should be. But there haven’t been enough houses closing at these lower prices to change that yet. I think that part is starting now.”
The result? A total shift in sellers’ relative positions.
“Sellers are negotiating the price now, instead of a few months ago, when there would be multiple offers, all coming in above asking price,” Bradley says. “Now, they’re negotiating for lower prices—not a lot lower, but lower.”
4. Charleston, SC
Median home list price: $500,000
Change since June: -8.6%
Change since September 2021: +10%
Charleston, a scenic but storm-prone vacation destination, has also been a hot market since the pandemic drove homebuyers away from bigger metros and toward more affordable places that also offer plenty of things to do.
But in the past year, the historic city on the water has been on a price roller coaster. It has seen the biggest fluctuation in price increases and decreases of any place on this list.
Listing prices have dropped by almost 9% in the past three months, but that follows a whopping 20% increase in the nine months prior. Home prices are still up 10% year over year.
However, the wild swings could leave many homeowners locked into a home that’s suddenly worth a lot less than they paid.
Right now $500,000 will buy a single-story, ranch-style home on James Island, within walking distance of the Clark Sound.
5. Ogden, UT
Median home list price: $532,500
Change since June: -8.6%
Change since September 2021: +7.7%
Ogden is about a 45-minute drive north of Salt Lake City. But its smaller-city feel and quicker access to the mountains give it a totally different vibe. For pandemic homebuyers who wanted an outdoor-centric city in the West, but with less of an urban feel, Ogden offered a great balance. From the center of Ogden, it’s only 30 minutes to the famous Utah powder at Snowbasin Resort.
Plus, home prices here have historically been close to the average U.S. home price. But like other metros on the list, its prices shot up over the past couple of years, up about 33% since the start of the pandemic. Now, they’ve come down quickly. Home prices are still up almost 8% year over year, but price reductions are abundant, rising about 257% in September compared with last year.
In Ogden, $539,000 will now buy a large, four-bedroom midcentury home, with views from the porch of the Wasatch Mountain range.
6. Denver, CO
Median home list price: $625,000
Change since June: -8.0%
Change since September 2021: +4.2%
Denver’s Mile High reputation still applies to the city’s elevation and, of course, its legal cannabis patrons—but not so much to the housing market. Home prices plunged 8% in the past three months.
Real estate in the popular city is still appreciating year over year. But after hitting nearly $680,000 for the median home in June of this year, prices are down 8%.
That’s likely at least partly due to the number of homes for sale rising nearly 70% year over year in September. Much of that increase is due to buyers spooked by higher mortgage rates not jumping on every home that comes up for sale, leading homes to sit on the market longer and inventory to accumulate a bit. The area has also experienced a lot of new construction.
In Denver’s downtown Capitol Hill neighborhood, buyers can get a contemporary condominium next to the Denver Art Museum with rooftop views of the Rocky Mountains for $624,000.
7. Las Vegas, NV
Median home list price: $460,000
Change since June: -7.9%
Change since September 2021: +7%
Las Vegas has been a gambler’s delight since it sprang from the barren Mojave Desert floor. But as anyone who’s visited knows, the house always wins.
Homeowners might have felt like they had been holding a pair of aces earlier this year, when home values were up 25% over the year before. But the nearly 8% drop in prices in recent months has wiped out most of those gains.
The area is no stranger to housing highs and lows, after leading the nation in home value increases prior to tanking during the Great Recession. When the housing bubble burst, the local real estate market suffered one of the worst blows in the nation. It was also one of the slowest to recover.
Like anyone who comes to Sin City thinking they’ll beat the odds, homeowners who thought they could count on inside-straight home value increases, solace must be found in the mantra “Easy come, easy go.”
8. Stockton, CA
Median home list price: $581,725
Change since June: -7.7%
Change since September 2021: +7.3%
During the pandemic, flocks of San Francisco Bay Area homeowners sold their homes for big bucks and looked outward for cheaper real estate. Stockton, about a 90-minute drive to the east, was one area that drew them in, with the allure of a Northern California home that, while still expensive relative to the rest of the U.S., offered a big discount compared with the astronomical home prices around the San Francisco area.
Those cash-carrying home shoppers drove prices up at a breakneck pace in areas like Stockton.
“They came over a little savvy, like, ‘Hey, I’ve got an all-cash offer,’” says Adrian Rosas, a real estate agent with HomeSmart PV & Associates in Stockton. “But so did the next buyer right after them. So that’s what we were seeing: People selling in the Bay and coming here, with all the telecommuting that’s possible now.”
Rosas says he has a listing for close to $400,000 that went under contract twice—and fell through both times.
“This particular house, it’s a prime location, in the heart of Stockton. It’s right around the corner from University of the Pacific (a four-year college in the town),” Rosas says. “It’s a two-bed, two-bath, just over 1,100 square feet. It’s a little dated, but definitely livable, with a big lot and lots of potential.”
After marking it down by $10,000 twice already, Rosas says his client decided to lower the asking price by another $20,000.
Buyers are seeing the downturn, too, Rosas says, and adjusting their approach accordingly.
“They’re seeing what’s happening with the listings. They’re getting smart to it,” he says. “Especially the younger buyers, they’re finding reliable information on prices coming down.”
That’s got some holding off for now, Rosas says, waiting to see if mortgage rates rise again, or if prices will fall further.
9. Durham, NC
Median home list price: $460,000
Change since June: -7.5%
Change since September 2021: +2.2%
Like the other places on this list, Durham, along with nearby Raleigh, NC, has seen big price increases in recent years. The rises in the Research Triangle—the area known for its top-tier universities and tech and biotech companies—were fueled by lots of investor purchases. The area, home to the Ivy League Duke University, was also popular with tech workers seeking more affordable real estate and a cheaper cost of living.
But like other areas that saw big competition over a limited number of properties, the days of high prices appear to be waning.
Year-over-year prices are still up. But at just a 2.2% increase since September 2021, Durham’s gains are the second lowest on the list, behind Austin.
In Durham right now, after a $5,000 discount, buyers can get this $435,000 updated, midcentury bungalow in the Duke Park neighborhood, close enough to downtown, but with plenty of access to trails and nature.
10. Spokane, WA
Median home list price: $449,900
Change since June: -7.4%
Change since September 2021: +5.6%
Rounding out the list is this popular pandemic destination. Spokane, situated in the east of the state close to the Idaho border, is a medium-sized city known for its affordability, moderate climate, and access to the surrounding nature.
“People used to say, when they came from the big metro areas, like Seattle or Northern California, because of the affordability here, you could get a three-bed for a quarter of what they were looking at there,” says BethAnn Long, Realtor with Re/Max of Spokane.
But she and other longtime residents didn’t expect prices to rise as much as they did over the past few years. Prices rose nearly 36% from March 2020 to the peak in June in the Spokane metro area.
“We saw it coming, that the market was going to not be supported, that the prices were rising irrationally,” she says. But she didn’t anticipate how quickly the market would turn.
“It really is night and day,” she continues. “For the last two years, prior to this change, which happened about three months ago, people were literally lining up to look at houses—literally 10 to 20 buyers for every house.”
Now, she says, sellers are feeling the downturn. “Most of them are pretty discouraged.”
And, Long says, there’s a disconnect between buyers and sellers, with both feeling like they’re not getting the deal they want.
“Sellers are living in last year,” she says. “Buyers are living in next year.”
By: Evan Wyloge I Realtor.com I October 10, 2022