US housing markets are slowing down more than anywhere else

Housing hotspots on the West Coast are cooling off more quickly than in any other areas of the country as rising mortgage rates drive a nationwide price correction, according to an analysis by real estate firm Redfin.

Among the 100 most populous metropolitan areas in the United States, the housing market in Seattle experienced a significant decline from February to August of this year — the period when mortgage rates rose. Las Vegas ranked second on the list of the most severe slowdowns, followed by San Jose, California.

Nine of the top 10 cities with questionable differentiation are located in the western half of the country, including four within California. Northport, Florida, was the only East Coast market near the top of the list.

“These are all places where homebuyers are feeling the pinch of high home prices, high mortgage rates, and inflation very sharply,” said Daryl Fairweather, chief economist at Redfin, “partly because a lot of people are priced, and partly because record low rates in Last year I made it unsustainably high.”

“The good news is that slowdowns dampen competition and give those who can still buy more bargaining power,” he added.

Mortgage rates are much higher than they were earlier this year.
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Seattle
Seattle cools faster than any other market.
Stephen Brashear

Redfin based its rankings on calculations related to annual house price changes, price declines, home inventory levels, pending home sales, sale-to-existing ratios and the share of homes that are out of the market in two weeks, the company said.

Mortgage rates have risen since January as the Federal Reserve moves ahead with raising interest rates that make borrowing money more expensive. The 30-year fixed-rate mortgage was 6.29% as of this week, up more than 3.40% from a year ago.

San Jose
Tech centers face lower demand.
AFP via Getty Images

The median home price in Seattle is $775,000 — which means the typical monthly mortgage payment is $4,400. That’s $1,000 more per month than previous rates, which were closer to 3% at the start of the year.

“Many sellers are unable to get the price they want because buyers don’t want to compete with other offers when mortgage rates are double what they were a year ago,” said David Palmer, a Seattle Redfin agent. “This means that there are fewer sellers listing their homes and fewer buyers bidding on those that reach the market.”

Las vigas
Las Vegas ranked second on the list.
Bloomberg via Getty Images

The company noted that many of the cities on the list, including Las Vegas, Phoenix, Sacramento and Northport — were “resettlement hotspots” during the pandemic era’s shift toward remote work. With monetary policy tightening and more companies returning to the office, these markets are slowing rapidly.

Additionally, cities with a large number of tech workers are seeing less demand because workers’ compensation is often tied to inventory — nearly all of which have fallen dramatically in recent months.

A growing number of analysts are warning of a correction in the housing sector. This week, Pantheon economist Ian Shepherdson said home prices could fall 20% by the middle of next year as the market stabilizes.

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