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Is the Pandemic Housing Boom About to Go Bust?
Is the Pandemic Housing Boom About to Go Bust?
ratings:
Length:
5 minutes
Released:
Sep 10, 2022
Format:
Podcast episode
Description
It looks like the pandemic housing boom is coming to an end. More and more sellers are slashing prices as mortgage rates rise and homes become less affordable for potential buyers. Some analysts are predicting that home values will drop by as much as 20% in markets that have gone up the most. And there are five markets at the top of that list.Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review. Real estate experts are calling these overvalued markets “zoom towns” because they experienced rapid price growth during the pandemic. According to Rick Palacios at John Burns Real Estate consulting, home prices in Boise, Idaho, will be the first to get slammed. Palacios says: “It is the single market that we anticipate actually getting to price declines in 2022.” (1)The Rise of Zoom TownsHe says Boise attracted a lot of new residents during the pandemic because of its lower cost of living and quality of life, but that drove prices sky high. The other four cities on his list of zoom towns that will see sharp price corrections are Austin, Texas; Nashville, Tennessee; Phoenix, Arizona; and Sacramento, California.A Redfin analysis shows that Boise home prices increased 60% over the course of the pandemic, and it’s now getting hit pretty hard by the market slowdown. Redfin says in July of last year, 30% of the listing prices were cut. That percentage has now more than doubled to 70% in July of this year.Data collected by John Burns shows that month-over-month prices are falling in Boise. It predicts that Boise will be the first metro to show a year-over-year decline in home prices. But Boise isn’t alone.Top Metros for Home Price GrowthAs reported by Fortune, the West is the epicenter of the pandemic housing boom, and is now shifting rapidly. In July, 58% of listings in Denver experienced price cuts along with 56% of listings in Salt Lake City, 55% in Tacoma, Washington, 50% in Phoenix and San Diego, and 47% in Stockton, California. And that’s just at the top of the list. (2)Zonda’s chief economist, Ali Wolf, says: “The strong demand over the past two years drove up home prices across the country, and it appears the West hit the pricing ceiling quicker than other markets given the particular supply constraints.” In other words, a combination of high demand, bidding wars, and tight inventory pushed prices in this area beyond what homebuyers are willing to pay.Forecast on Home Price DeclinesSo the market is cooling the fastest while inventory is rising in what have been pandemic zoom towns. Moody’s Analytics is expecting price declines of 0 to 5% during the slowdown. But it expects declines of 5 to 10% in the 187 markets that it says are “significantly overvalued.” If we have a recession, the declines will be more like 15 to 20%.It’s good to remember that we’re still seeing year-over-year growth nationally, but it is slowing down every month. And depending on when you bought property, that could be a problem if you currently want to sell that same property. For example, if gains are dropping from 20% in January to 10% in July, and continuing in a downward slide, recent buyers could lose equity if they sell right now. It depends on the market and how much home prices have gone up recently.The markets I previously mentioned are expected to get hit by big price declines, along with others like Miami and Las Vegas. Selling homes in those markets during the current slowdown will likely result in the loss of equity. Those planning to hold on to their homes don’t need to worry since they just want a place to live, and values will likely recover over time. The buyers who locked-in low mortgage rates are also in even better shape. You’ll find a link to the articles mentioned in the show notes at newsforinvestors.com. If you’d like to learn more about owning single-family rentals, please hit the join link at the website. And please remember to hit the subscribe button, and leav
Released:
Sep 10, 2022
Format:
Podcast episode
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