The American City Where Home Prices Are Plunging
The U.S. residential real estate market is about to take a brutal U-turn after two years of surging prices. Since early in 2021, low mortgage rates and migration from America’s largest cities because people could work from home drove prices higher by 20% year over year most months. Mortgage rates that have surged, plus worry about a recession, have sent the home market into the early stage of a retreat. In some cities, that retreat is underway. The city where that is most evident, Austin, Texas, was one of the fastest-growing and most affluent markets in America.
Mortgage rates are the most obvious barrier to an ongoing increase in home prices. A year ago, a 30-year fixed mortgage carried an interest rate near 3%. That number has risen above 6% and continues to increase. This, in turn, means monthly mortgage payments have jumped by hundreds of dollars when calculated against the median home price in America, which is about $400,000.
According to Realtor.com’s recent Buyer Bargains: Here Are the 10 U.S. Cities Where Home Prices Are Dropping the Most Right Now report, “Higher mortgage interest rates have thinned out the ranks of buyers who can still qualify for a home loan and sharply reduced the price of the homes the remaining few in the market can afford.”
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The 10 cities listed in the report were chosen based on the median price of a home for sale in September, compared to June and to September 2021. In Austin, the price has fallen 10.3% in the four months measured.
Austin is among America’s most expensive housing markets. The $558,275 median value of a home for sale in the metro is well above the national number. Austin also has had a run-up in home prices as people who live in areas along America’s costs relocate. According to RoofStock, the average home price in Austin has risen by 99% in the past five years.
Austin is joined on the Realtor.com list by other cities with warm weather: Phoenix, Las Vegas and Palm Bay, Florida.
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