(RoyalPatriot.com )- A raging housing market that never seemed like it was never going to stop climbing is apparently starting to level off and come back the other way.
According to data produced by Redfin recently, drops in home prices are “becoming increasingly common” across America in what were some of the most popular markets. The data shows that more than 20% of sellers ended up dropping their list price for their home in seven out of the 10 most popular destinations for movers.
Over the last month this was realized in Phoenix, Arizona; San Antonio, Texas; Atlanta, Georgia; Tampa, Florida; North Port, Florida; Sacramento, California; and Cape Coral, Florida.
Redfin says that the main reason for this is that mortgage rates are rising, thanks in part to the Federal Reserve increasing its benchmark interest rate by a half-point recently — and planning for more increases throughout the rest of 2022.
As Daryl Fairweather, the chief economist for Redfin, commented in a statement:
“When mortgage rates were at or below 3%, both local and out-of-town homebuyers were more willing and able to tolerate high prices, but at 5%, many are now priced out. A home’s price is driven by the balance of supply and demand, and when demand drops off and supply increases like it is now, rapid price increases evaporate quickly.”
Fairweather said these regions are experiencing “an abrupt drop-off in demand” after two years’ worth of sharp increases in price fueled by a surge in people moving to new areas of the country. This is forcing the sellers to then “drop their prices with increasing frequency.”
Boise, Idaho, is where the largest share of home sellers dropped their price recently, according to the analysis done by Redfin. In April alone, 41% of sellers there decreased their asking price, a 10% increase over the number that did so last year at that time.
In the past two years, Boise’s home prices increased by 62%.
Similar data points were observed in other areas of the country, such as Cape Coral, where 33% of home sellers decreased their asking price. In Sacramento, that number was 30%. In New Orleans, it was 32%, and in nearby Baton Rouge, Louisiana, it was 31%.
As Redfin commented:
“For home sellers in these markets, the sharp increase in mortgage rates has knocked some of the wind out of a housing market that had been super-charged by surging migration.”
These sellers are now “driving the national rate of price drops to its highest level since October 2019.”
Despite the fact that price drops are now becoming increasingly more common, the housing market is still much higher in value compared to where it was only two years ago. The rapid increase in prices over these last two years is still outweighing the recent drop in prices, meaning many homeowners have still experienced positive equity in their homes in that time period.
What this really means, though, is that homeowners may not be able to get what they were expecting for their homes, and this is a trend that may continue for the foreseeable future with more interest rate hikes on the horizon.