These 5 Housing Markets Are at the Greatest Risk of Price Drops
KEY POINTS
- Rising interest rates have led to falling home prices in some markets.
- Markets with dropping prices are still more expensive than they were last year.
- Homeownership is increasingly out of reach for many households.
The watch begins for tumbling home prices.
CoreLogic, Inc. is a company that analyzes the housing market to provide a snapshot of what's going on today and what the future is likely to hold. CoreLogic recently released its forecast through Aug. 2023. Here's what it found.
National home prices
Due to a continued lack of inventory, home prices are expected to increase year over year by 3.2%. To put that in perspective, since 1991, the average annual home price has increased by 4.3%. Since 2000, the average increase year over year has been 4.7%. And over the past 10 years, the average annual rate of increase has been 7.7%. Even though home values are not expected to rise as quickly as they have historically, the increases of the past two years have already put prices out of reach for many.
Markets at risk of falling prices
| Risk Rank | Metropolitan Areas | Level of Risk of Price Decline | Confidence Score |
|---|---|---|---|
| No. 1 | Crestview-Fort Walton Beach-Destin, Florida | VERY HIGH. Above 70% probability | 50% to 75% |
| No. 2 | Bremerton-Silverdale, Washington | VERY HIGH. Above 70% probability | 50% to 75% |
| No. 3 | Bellingham, Washington | VERY HIGH. Above 70% probability | 50% to 75% |
| No. 4 | Boise City, Idaho | VERY HIGH. Above 70% probability | 50% to 75% |
| No. 5 | Reno, Nevada | VERY HIGH. Above 70% probability | 50% to 75% |
How CoreLogic makes its forecast
CoreLogic looks at what the market is doing now while also factoring in how much money local residents have to spend on housing, short-run fluctuations that were caused by market momentum, and the unemployment rate.
The company claims a +/- 2% margin of error.
Other tumbling markets
After two years of growth, median list prices have fallen by up to 10% from their highs in some of the hottest markets in the country. At the heart of the issue are rising interest rates designed to control inflation.
Some buyers are not willing to commit to more expensive house payments, while others are priced out of the market, unable to qualify for a new mortgage.
According to Realtor.com, here's where home prices have fallen most dramatically since June:
| City | Median home price Sept. 2022 | Change since June 2022 | Change since Sept. 2021 |
|---|---|---|---|
| Austin, Texas | $558,275 | -10.3% | +2.2% |
| Phoenix, Arizona | $493,500 | -9.9% | +4.4% |
| Palm Bay, Florida | $379,995 | -8.9% | +5.8% |
| Charleston, South Carolina | $500,000 | -8.6% | +10% |
| Ogden, Utah | $532,500 | -8.6% | +7.7% |
| Denver, Colorado | $625,000 | -8.0% | +4.2% |
| Las Vegas, Nevada | $460,000 | -7.9% | +7% |
| Stockton, California | $581,725 | -7.7% | +7.3 |
| Durham, North Carolina | $460,000 | -7.5% | +2.2% |
| Spokane, Washington | $449,900 | -7.4% | +5.6% |
While prices in these 10 cities have fallen since June, listing prices are still higher than they were last year. That not only makes budgeting more difficult for the average family, but it also means some home buyers are at risk of owing more on their mortgages than their homes are worth when the market hits bottom.
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