Home price correction’s latest shift, as told by 6 housing market charts

At the peak of the housing correction, 79% of the country’s 200 largest housing markets saw monthly house price declines in September. In October, 76% of these major markets saw home prices fall. In November and December it had fallen to 64% and 67% respectively. And through January, just 47% of the country’s 200 largest housing markets saw monthly home price declines.

What does that tell us? Well, the home price correction is losing momentum — at least geographically.

To better understand what is happening in the US housing market, wealth created seven charts using the latest seasonally adjusted data from the Zillow Home Value Index. The Index measures property values ​​in the 35th to 65th percentile range (meaning it looks at the middle of the market).

Let’s take a look at the updated data.

In the US housing market, new and existing home sales fell at an historic pace in the second half of 2022 as the market adjusted to last year’s rise in mortgage rates.

This year, however, that free fall in activity has stopped as the average 30-year fixed-rate mortgage rate declined slightly, from 7.37% in early November to 6.57% on Monday, and as we entered the seasonal springtime period when demand picks up . On the new home side, aggressive price cuts by homebuilders coupled with incentives like mortgage rate buybacks are helping homebuilders increase sales.

The result? The house price correction has lost some momentum. In September, home prices fell in 79% of major markets, compared to 38% in February. But that doesn’t mean national home prices have returned to growth mode. As a matter of fact, Nationwide, Zillow home prices fell 0.02% in February.

From peaking in June, US home prices, as measured by the seasonally adjusted Case-Shiller National Home Price Index, are down 2.7% through December. Excluding seasonal adjustment, US home prices are down 4.4% from their peak.

On the one hand, the ongoing correction is the first nationwide correction since the housing crash in 2012. On the other hand, the 2.7% drop is mild compared to the 26% drop that took place between the market high in 2006 and the low in 2012 .

Unlike the 2008 crash, this time we have neither an inventory glut (active listings in February 2023 were 37.6% below February 2020 levels) nor a subprime crisis.

Ultimately, analysts from the likes of Fannie Mae and Moody’s Analytics expect a peak-to-trough decline of about 10%. While economists at Zillow and CoreLogic believe national prices could bottom this spring. However, economists at all of these companies recognize that peak-to-trough declines will vary significantly by market.

While the correction has lost steam, it’s still very much alive.

In the first two months of 2023, the biggest home price declines were in markets like Austin (down 2.5% since December), Boise (down 2.4%), Las Vegas (down 2.4%) and Phoenix (down 2.2%) found. ) and San Jose (down another 2.1%).

“We still think there is more [home] On the resale side, however, a price correction is imminent. And the resale market is getting stickier in terms of downside [home] Awards,” Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting, said in a video released in February.

While many real estate markets in the West and South continue to decline, many markets in the Midwest and Northeast continue to rise. These include places like Chicago (up 0.6% since December) and Scranton, Pennsylvania (up 2.4% since December). Unlike their Western and Southeastern counterparts, house prices in these markets have not decoupled as much from local income levels during the pandemic housing boom.

Among the nation’s 400 largest housing markets tracked by Zillow, local home prices fell in 232 from their respective highs in 2022. Of those declining markets, home prices in 39 fell more than 5.00% from their respective 2022 highs. These include places like Boise (down 8.9% from peak), Austin (down 8.9%) and Phoenix ( minus 7.1%).

Nonetheless, prices remain year-on-year higher in most housing markets. The few exceptions are places like Boise, where prices fell 5.2% between February 2022 and February 2023.

This will change in the coming months. As hot months like February 2022 and March 2022 recede, more markets will turn year-on-year negative. Indeed, many housing analysts expect National Home prices will be negative year-on-year through April.

However, property prices have still risen significantly since the pandemic began.

During the pandemic housing boom from March 2020 to June 2022, U.S. home prices, as measured by the seasonally adjusted Case-Shiller National Home Price Index, soared 41.2%. Since then, national home prices have fallen by 2.7%. That reduces the remaining gains from the pandemic housing boom to 37.4%.

Even the markets that are experiencing sharp declines are still strong.

Just look at Austin, where house prices in February are down 8.9% from their 2022 peak, but are still 44.4% above their March 2020 price.

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