The housing market slowed significantly last year, but the nation’s strongest home markets have not been severely impacted.
- With millions of citizens migrating, a tight real estate market, and high interest rates impacting the housing market, the U.S. housing market ended up losing $2.3 trillion last year.
- This marks the most considerable shrink in the market since the 2008 crash, according to Wednesday’s Redfin study.
- The Federal Reserve’s eight consecutive interest-rate hikes are expected to continue putting pressure on the market. Zillow data shows average housing prices have dropped from a peak of more than $333,000 in August to $328,000 in January.
- This real estate slowdown isn’t reflected in the nation’s hottest markets, with states like Texas, Tennessee, Florida, and Arizona reporting high growth rates, continued housing shortages, and high demand.
Why It’s Important
Since 2019, the U.S. housing market has been white-hot, with millions of people in states like New York and California packing up and moving to greener pastures in southern states, where low taxes, higher quality of life, stronger job markets, and less-expensive real estate offer new opportunities.
This has proved to be a blessing and a curse for native residents of these states. Cities like Austin, Texas, and Nashville, Tennessee, have seen influxes of new residents that have driven up housing prices, forcing buyers to offer $50,000 to $100,000 above market prices in their bids for used homes. It reflects the solid pro-business positions of local politicians and strong job markets but comes at the expense of locals being priced out of their own markets.
Backing Up A Bit
Cliff Freeman Jr. is a broker associate at the Cliff Freeman Group in Dallas-Fort Worth, Texas, where he has worked since 1987. He tells Leaders Media that Texas cities like Austin are among the most overpriced in the country, even with prices in the state dropping roughly 4% to 5% since June 2022.
“The thing that Texas and Tennessee have in common is a favorable business climate and low taxes. We’ve had more corporate relocations in the past few years than we’ve seen even, and it’s impacted the economy. At one point, we had 5,000 people per week moving to Dallas-Forth Worth. People are attracted to jobs and opportunities here. We have an issue right now keeping up with housing for everyone moving,” says Freeman.
Ryan Turbeville is the director of commercial real estate for the Ashton Real Estate Group in Nashville. He noticed the housing market dip in the summer of 2022 after the peak of inflation rates in June. Housing prices in Nashville haven’t dropped. However, the market growth rate has decreased.
“We’re not immune to macroeconomic trends, but we’re still susceptible to slowdown. The market has slowed, but it’s still up year-to-date. When people see large price drops or see homes sitting on the market for longer, it looks bad, but only in comparison to how good things have been. However, people are still moving here, and there is still low inventory,” says Turbeville.
There is a good chance the national market will show signs of improvement by late 2023. The Fed’s aggressive hikes are expected to continue throughout the spring and summer until inflation rates reflect the adjustments. When the market finally begins showing results, the Fed will back off, and housing markets will improve.
Real estate also tends to cool in the winter months as families settle into school and the holidays. House hunting heats up in the spring so families are able to move without negatively impacting their children’s education. Demand in the summer months could give the market a needed bump.
“We’re trying to determine if this is a seasonal adjustment due to the interest rate hikes, or a real change. Because of the demand, we’ve had very strong prices beyond what we would normally see this time of year,” says Freeman.
“It’s going to depend on what the market and what migration looks like. California has been hit harder than Texas because of the people moving out, but things progress to the mean over time. We’ll see price adjustments, not necessarily what we saw in 2008, but it’s time for things to take a breather and let supply catch up.”