New housing market data reveals an astonishing turnaround, as these 21 top 50 key areas show price drops for June

It finally happens. After rising 40% from pre-pandemic levels in the biggest recovery in decades, home prices peaked in June, and began falling in July. That’s the startling and surprising shift revealed in a new set of data just presented by the American Enterprise Institute’s Housing Center, one of the most important sources of city-by-city numbers on everything related to housing, from appreciation to inventory and mortgage origination. “The market has just reached a tipping point,” says Ed Pinto, director of the AEI Housing Center. Prices will continue to fall on a national basis from August to December. We’re likely to see a drop in about four out of five metro stations in some coming months.”

So far, the AEI has mainly been measuring prices on a year-over-year basis. By that measure, housing still looks strong in June. That month, the AEI found that the value of the average home had grown by 15% as of June 2021. But its data also showed that over a 12-month period, the “home price appreciation”, or HPA, was slowing rapidly, dropping significantly from a peak of 17.5 % in April. The question this withdrawal posed to homeowners in America: What’s going on ImmediatelyWeek after week or month after month? Is it possible that the prices in my city, in Atlanta or Phoenix or Raleigh, are really staring drop?

The new AEI data answers this query. The metric displays price changes from month to month. Hence, the numbers provide a close-up look at exactly when the patterns rotated, by how much, and what the movements predicted. It’s a guide to reading the pulse of the market. AEI numbers are based on actual closings for the month, as reported in public records. Pinto publishes a methodology that compares sales of homes of similar quality, eliminating distortions caused by shifts in the sales “mix” — for example, a misleading boost to average prices as a higher percentage of expensive homes sold in June than in May.

An astonishing number of markets are already posting declines

The AEI calculated the numbers for the 50 most active housing markets in the country. The AEI chart, “House Price Estimate (Month by Month)” shows changes from one month to the next from the beginning of 2019 through June of this year. Let’s start with national data. The market in general has been on a relentless rampage, for a long time, with prices only falling twice in that period, each time by only 0.1%. As recently as January, the monthly HPA in America was 2.6%, and in May it fell to 1.1% still solid. But in June, the estimate fell to just 0.2%.

Behind this national transformation are stunning setbacks in scattered cities that were thriving just months ago. In June of 2021, only four metro stations showed a drop in prices from May and last year, the only loser from May to June was Louisville with a meager 0.1%. In April, none of the 50 metros had collapsed since March. But in June of this year, at least 21 locations suffered from their May price drops, some of them significant. In general, the steepest declines came in expensive West Coast markets, as well as in western metro areas that gained legions of buyers from mass immigration from California. Eleven of the worst hit titles fit this category. San Francisco was the biggest loser with -3.8%, followed by San Jose (-3.2%). Other western cities with significant declines included Seattle (-1.8%), Los Angeles (-1.5%), Portland (-1.3%), Denver (-0.9%) and Phoenix (-0.6%). Almost all of those metros have been swinging lately in February, with San Francisco up 2.8% from January, San Jose advancing 3.9%, and Seattle up 3.5%.

“The clearest trend is the withdrawal in these West Coast cities, and those that have been affected by the California madness,” Pinto says. In these places, massive price increases in the past two years, from already expensive levels, have shrunk affordability so much that the rapidly shrinking ranks of buyers are hitting values ​​despite falling home sizes for sale. From the fourth quarter of 2019 to the first quarter of this year, prices jumped from $1.2 million to $1.6 million in San Joe, from $575,000 to $819,000 in Seattle, from $466 to $623,000 in Denver, and from $340 $1000 to $516K in Phoenix. The only western markets still showing strength were Las Vegas, a cool place but still able to post a 0.2% increase during May, and Boise, where prices fell 1.8%, maintaining a record of consistent progress month-on-month. Boise continues to thrive as a preferred destination for work-at-home refugees from California who can sell a home like, say, San Jose, get a much bigger housing at half the cost in their approved city, and still shell out hundreds of thousands of dollars.

In recent months, the hottest markets have gathered in the sun’s rays. Cape Coral, which has been posting year-over-year points in increases in the mid-30% range, is rapidly declining (you can read my recent Cape Coral Market feature here). It flipped its 2.8% gain from April to May to negative 1.0% in June. Tampa, Northport, Orlando, Jacksonville and Miami all retracted February increases, but still advanced between 0.2% and 1.1%.

By contrast, a number of older central areas that did not experience significant price gains have shown remarkable resilience, for a simple reason: many remain relatively cheap. St. Louis, Nashville, Boston, Providence, Philadelphia, Kansas City, Columbus and New York ranked in the top 10 for May and June gains. It tied for first place with Boise the Big Apple, which has a 1.8% monthly increase and is one of the few strong companies to appear on an upward trajectory.

The June overdraft radically changed the outlook for this year and 2023

Pinto also takes a closer look at the direction prices are headed by studying Optimal Blue’s “price lock” data. These numbers reflect contract prices for sales that will close in approximately 90 days. For Pinto, the price-locking trend refers to lower prices, nationally, from July to December of 2022. “We expect the national month’s HPA to turn negative in July for the first time in years,” he says. From there, prices should drop 3% to 5% from June levels by the end of the year. These aggregate increases will gradually build up over the seven months from June to December.” By the end of the year, Pinto expects home prices to remain 4% to 6% above December of 2021, but are likely to remain on a downward trajectory.

Pinto predicts that if overall prices are down about 4% between here and the end of the year, much more central districts than the 21 that were negative in June will soon post month-to-month downturns. “I wouldn’t be surprised if we saw some months in 40 cities experiencing declines,” he says.

So where does Pinto see the direction of values ​​in 2023? It appears that if prices fall in December, they will continue to fall through most of 2023. But that’s not necessarily the most likely scenario, says Pinto. “We’ve seen mortgage rates drop in recent weeks from 6% to about 5.5%,” Pinto says. “If interest rates continue to fall, that will give a boost to the upside.” He points out that although stocks are growing, stocks are still very small. “We are still about a month out of supply at the current demand level,” he says. “For prices to come down, we’d need to see seven ‘months of show’, and that could be a long way off.” For Pinto, it is very likely that a combination of stable or declining rates, and limited volumes of homes for sale, could sustain gains of between 4% and 6% next year.

However, Pinto says it hasn’t been difficult to predict the future of housing. “There are many factors that are pushing and pulling in different directions,” he says. “My crystal ball is getting blurry.” The new monthly AEI numbers allow homeowners to see the trajectory of the market, not just over extended periods, but as it evolves. People are very concerned about what today’s turbulent times mean for the future of their biggest asset. They want to know if the value of their farm of the colonies has dwindled or dwindled in the past 30 days. Now they can. AEI numbers do not give homeowners a crystal ball. But following the new AEI data will keep your thumbs up on the market’s pulse for a market that, for most Americans, is more important to everyone else yet.

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