Prices drop in 90% of U.S. housing markets
In a homebuying world that's become unaffordable for many Americans — no less most Californians — it's good news for house hunters when home prices decline.
Now, most merchants facing sinking demand for their goods would drop prices and brag about the discounts. Curiously, that price-cutting logic seldom applies to home sales.
Ponder home pricing in the last six months of 2022 where 90% of 186 U.S. housing markets had price drops, according to my trusty spreadsheet's review of stats from the National Association of Realtors. It was a swift turnabout from the first half of 2022 when just 1% of markets had price dips.
In the second half of the year, the national median sales price was off 8.2%, dropping to $379,000. The worst performance nationwide was a 21.9% drop in the formerly redhot market of Austin, Texas. San Francisco was next (down 20.6%), then Boulder, Colorado (off 18.6%), San Jose (down 17%) and Spokane, Washington (off 15%).
In fact, 13% of these 186 markets had double-digit price drops. Think of the folks who bought early in 2022 in these markets. They've lost significant equity in their new home.
Now if you forgot, the pandemic era's homebuying spree abruptly ended in the middle of 2022 after the Federal Reserve ended its cheap-money policies and hiked mortgage rates.
That ballooned the monthly payment for a typical U.S. buyer by 58% in a year, by the association's math. So homebuying became unaffordable for a growing swath of the house-hunting crowd.
Plus, life's return to conditions somewhat near pre-pandemic circumstances — back to offices and classrooms, for example — further thinned demand.
As a result, one-third fewer homes were bought nationwide last year versus 2021. Obviously, less buying meant discounting was in order.
But the home sales industry is often shy about discussing price cuts. That's too bad.
More widespread admissions that prices are down would likely increase demand from folks who think ownership dreams are hopeless. Also, an increased acknowledgment of recent depreciation might get potential sellers to be more realistic about pricing their soughtafter homes.
Sadly, I fear, too much emphasis is put on ownership's investment potential. So, talking up price cuts might scare away folks looking at a home's wealth-creation prospects.
Still, even after serious discounting late in 2022, the U.S. median selling price is still up