10 Primary Real Estate Markets Slashing Home Prices

The once red-hot pandemic housing boom is slowly starting to cool down as housing markets across the country aggressively slash prices while more and more potential buyers pull out of the market amid rising borrower costs.

During the onset of the pandemic, millions of Americans relinquished the opportunity to purchase property, as subprime mortgage rates bottomed at close to zero. Many households enjoyed excess savings due to stimulus support.

The good times didn’t last long, and as soon as demand started increasing and supply remained limited, average property prices skyrocketed.

Data from various housing and real estate experts suggest that the median house price is up between 32% and 39% since 2020. According to figures provided by the St. Louis Federal Reserve, current median sale prices for homes are anywhere between $420,500 and $428,700.

This is only the tail-end of the pandemic-fueled housing crisis, which has left many first-time buyers opting out. Rising costs and the burden of higher interest rates are now keeping them from finalizing their purchases.

Some analysts found that 50 of the country’s largest metropolitan areas, including Austin, Phoenix, and Las Vegas, among others, witnessed some of the biggest price gains in the last year – above the $46,000 gain some markets experienced by the end of December 2021.

Buying a house right now, or even renting for that matter, has become an expensive and tumultuous experience. Soaring prices, shrinking demand, and an even lower sector sentiment have led many to believe that the housing market has now entered a recessionary period.

High Prices Amid A Housing Recession?

Despite the recent changes, you may have noticed that median asking prices are still way above what they were during the buying market frenzy.

There are a couple of factors that play a role in keeping housing prices high.

Limited Supply

As scorching inflation and record-high mortgage rates hurt their budgets, a limited supply of inventory has meant that prices have remained substantially higher than usual.

Lowering Builder Sentiment

Builders and contractors have also become increasingly reluctant to continue building new homes amid the rise in interest rates, and the soaring cost of materials. Back in August 2022, The National Association of Home Builders and Wells Fargo Housing Market Index dropped by 6 points to 49. This marked the index’s eighth consecutive drop.

Less Affordability

In June 2022, mortgage rates climbed to nearly 6%, with the average 30-year fixed rate mortgage, the most frequented among home buyers, hovering at 5.51% at the end of July 2022. Around the same period last year, mortgage rates were around 2.88%. The Federal Reserve has been aggressively adjusting interest rates to combat skyrocketing inflation.

Future Outlook

Some housing experts and strategists have predicted activity decreasing further in the coming months. An analysis published by Goldman Sachs suggests that home growth will completely bottom out, stalling at 0% in 2023.

The purchasing power of many potential home buyers has significantly tumbled in recent months, and many are now too reluctant to set foot in the housing market, even with some areas making major price cuts.

10 Primary Real Estate Markets Slashing Home Prices

With so many mixed signals coming from all corners of the market, many potential first-time buyers feel quite anxious, fearing they may never be able to afford or own a home.

Despite the uncertainty, there are still buyers out there looking for their dream home.

In recent months, ten primary real estate markets have slashed their prices in hopes of attracting buyers.

Boise, Idaho

The capital city of Idaho has seen the most significant drop in property prices this year, with 69.7% of listings seeing average house prices coming down significantly. This is higher than the 29.6% recorded for the same period of July 2021.

Denver, Colorado

The thrill-seeking city is now a buyer’s market, with 58% of the local market seeing a drop in house prices as of July 2022. Furthermore, the city has also noted that new listings have decreased by 15.50% ending August, and the closing price for a single-family house is down 4.39% between July and August 2022.

Salt Lake City, Utah

Some have argued that Salt Lake’s housing market is starting to approach normalcy, yet average rental prices have increased by 14% since 2021. Out-of-control rent prices have now taken over the housing market, and the city witnessed 56.4% of house prices drop in July 2022 alone.

Tacoma, Washington

Tacoma was once considered a major pandemic boomtown for remote workers relocating from bigger metropolitans and single families looking for a fresh start away from the hustle and bustle of the big city. Although this has now calmed, close to 55% of housing prices are down for the period of July 2022, higher than the recorded 29.6% for the same period last year.

Tampa, Florida

Florida was no stranger to the pandemic housing boom, as retirees and families relocated to the Sunshine State in droves as a way to escape the harshness of northern weather and strict pandemic-related protocols. So far, 52.1% of house prices are down, with the median house price currently standing at $379,900, according to the most recent data.

Sacramento, California

As cities coast to coast experienced mass migration throughout most of the pandemic years, Sacramento was only second to Miami, FL, to experience an influx of new residents relocating to the area. On average, local user density jumped by 44.5% in the area, and despite the slew of new residents, 52.0% of houses on the market have witnessed prices plummeting between July 2021 and July 2022.

Austin, Texas

The local housing market in Austin is also taking a turn, now looking to favor buyers instead of sellers. With the median house price expected to hit $594,893, about 46.5% of homes are experiencing a decrease in prices. The city has experienced an influx of new residents throughout most of the early months of the pandemic, but the changing market sentiment and uncertain economic activities have seen many departing the area as well.

Phoenix, Arizona

Once thought to be one of the country’s hottest housing markets, the City of Phoenix has now seen house prices fall for two consecutive months. Between May and June, median house prices dropped from $465,000 to $460,000, and then a further 2.8% between June and July this year. Although prices have been coming down, on average, the median house price is still 11.6% higher than in 2021.

San Diego, California

The cooldown continues in San Diego, while many real estate professionals are positive that the city has yet to experience any of the potential threats caused by a looming housing market recession. Some realtors have seen sales jump by 9% compared to 2021, while 49.7% of homes sellers have already lowered prices significantly.

Portland, Oregon

Portland has re-welcomed a buying market in recent months. The market has cooled tremendously, with 48.3% of listings already seeing a decrease in prices. Confidence in the area has been restored, so much so that some local investors are now even looking to purchase a second home in the coming months or years.

When Will the Market Reset?

While there is no clear indication of when the market will fully reset to pre-pandemic levels, potential home buyers are encouraged to keep their fingers on the pulse of the market, monitoring and tracking changes and fluctuations within the real estate sector.

Furthermore, although it may look as if the real estate market is buyer-friendly again, many still need to bulk up their savings and seek advice from realtors or financial advisors to help them make the best possible decision.

While it’s looking as if the market may experience further turn down in the coming months leading well into 2023, the possibility of a real estate recession could send prices dwindling even further. That could be the perfect opportunity for many to then jump into the market.

The Bottom Line

It’s looking as if it’s becoming more and more expensive and difficult to purchase a home. Many Americans are holding out for a possible downturn before they set foot into the once red-hot real estate market.

Housing prices in some cities and major metropolitans have decreased significantly from their once pandemic high. It's likely we will see this list expanding in the months ahead.

The high cost of living and the burden of fire ants or pushing more and more people to become potential buyers can help restart the slowing housing market despite the changing economic cycle.

Whether you are ready to buy a house or waiting for the perfect moment, it’s best advised always to keep yourself well informed and talk to professionals to help you make the best possible real estate purchase.

This article was produced by ValueWalk and syndicated by Wealth of Geeks.