Some of the hottest housing markets in the country are starting to cool, falling by the largest month-to-month amount in more than a decade and a lack of affordability is likely to blame.
Home values lost 0.3% from July to August, according to Zillow’s most recent market report.
Rising interest rates are helping cool a historic rise in housing prices. On Wednesday, the Federal Reserve announced another supersized rate hike, which drove the 30-year-mortgage rate above 6%. Making buying in some of the most expensive markets in the country particularly off-putting.
The unprecedented rise in prices over the pandemic, along with the spiking mortgage rates, have pushed the cost of home ownership to new levels. According to Zillow, the mortgage payment on a typical home in 2019 was $897, three years later, that same typical home has a payment of $1,643 – an 83% increase.
And it’s that dwindling affordability, according to Zillow, that’s causing markets that are more affordable to retain their value, while some of the most expensive are starting to fall.
Some [cities in the midwest and the south] are even showing signs of growing in value, while some of the most expensive cities, particularly on the west coast, are seeing values drop significantly: San Francisco (-3.4%), Los Angeles (-3.4%), Sacramento (-3.2%), and Salt Lake City (-2.6%), fell the furthest.
Home values in San Francisco dropped a staggering 3.4% from July to August.
With a population of just over 800,000, the tech hub is still one of the most expensive markets in the country, but it’s starting to slow down.
House sales plummeted, down 24% year over year in August and prices dropped 11.6%, according to the California Association of Realtors. The decline in sales coincides with rising interest rates. Redfin says San Francisco’s market is still “somewhat” competitive. The median sale price is $1.3 million but sales are down nearly 12% year over year, says Redfin.
Los Angeles, the second most populous city in the country, kept pace with San Francisco for falling values, dropping 3.4% month to month.
While prices are going up, the number of sales is falling. Sales fell a whopping 29% in August from the same time last year, but the median sold price rose slightly year over year and even from July to August says the California Association of Realtors.
The median sale price in the city is about $1 million, according to Redfin. Realtor.com says Los Angeles is still a seller’s market, with demand still outpacing supply.
California’s state capital rounded out the top three biggest dips from July to August, down 3.2%, according to Zillow. With a population of about half a million, the housing market has been tight in Sacramento over the past couple of years, though things are starting to slow. While sales were up 6.6% month to month, prices actually fell 2.7% from July to August, according to the California Association of Realtors.
But the city is still considered a seller's market by both Redfin and Realtor.com.
Salt Lake City
Salt Lake City is another city that got a supercharge to its housing market during the pandemic.
Its population is about 200,000 but it’s been growing steadily, putting pressure on the housing market. But values have started falling. From July to August home values dropped 2.6%, according to Zillow.
While closed sales in Salt Lake County were down 26% year over year in August, the median sale price climbed more than 10% over the same period, according to the Utah Association of Realtors. The median listed price is about $575,000. Still, houses typically spend 20 days on the market and most get multiple offers, according to Redfin.
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