Real estate listings swelling in all major metropolitan areas
The impact of rising mortgage rates are being felt across all major regions in the US housing market. Residential listings are surging across all major metropolitan statistical areas (MSA) as interest rates skyrocketed. The 30-year fixed mortgage rates went from less than 4% in March 2022 to over 6.5% as of this writing (September 25, 2022), according to financial websites such as Bankrate.com. Prices have also tumbled across many major metropolitan statistical areas, according to data from Realtor.com.
Listings have surged by over 300% in the Austin-Round Rock area in the past four months, while the Phoenix-Mesa-Scottsdale region swelled by 270%. Seattle listings rose by 225%. The Miami-Fort Lauderdale-West Palm Beach area was at the bottom of our list of twenty one major MSAs, but even there residential listings increased by a sizable 75%. Granted, the inventories at these regions were at a historic low in the first few months of
2022. Nonetheless, the rapid rise in available homes for sale is stunning.
Check out ApexaVision’s real estate dashboard for zip-code level housing market data.
Price declines are wiping out equity for recent buyers
Prices in the Austin-Round Rock MSA area are reeling. Average home prices have fallen by 8% in the last four months, according to Realtor.com data. Over the same period, homes in the Denver-Aurora-Lakewood area has declined by 6%. Home prices in Phoenix-Mesa-Scottsdale, Sacramento, and Las Vegas-Henderson-Paradise regions also fell by 5%.
So what does a 5% drop in home prices mean? Well, for a typical home in the Las Vegas area, which sold for near $500,000 back in April 2022, that would translate into a loss of $25,000. If you plunked down a $100,000 (20%) down payment, that means your equity went from $100,000 to $75,000 for a 25% drop in four months. That’s worst than the bear market we are seeing in stocks so far this year. Ouch.
However, we need to keep in mind that the Las Vegas housing market had a phenomenal past five years. It varies depending on your exact zip code, but prices easily increased by 40%-50% from mid-2017 to early-2022. Therefore, if you got in the housing market before the recent rise in interest rates and current price drop, you should be in reasonably good shape.
Also, notice that the metropolitan regions with the largest increase in real estate listings are also the regions with the largest price declines. For example, Austin, Phoenix, and Seattle were the top regions with the highest listing increase (percentage wise) since April. They are also the regions with some of the largest price declines.
What’s next for the real estate market?
Well, no one can say for sure how low prices will go. However, with interest rates at these levels, affordability is becoming a big issue for would-be buyers. We will probably need to see interest rates go lower before home prices can stop falling. That, in turn, will depend on inflation data because the Fed is focused on fighting rampant inflation now. Watch that consumer price index for clues on where interest rates and home prices will go in the near-term.
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