By Naveen Athrappully
While home prices in the United States have appreciated by more than a third over the past two years, prices are poised to fall in several housing markets over the next 12 months, according to data analyzed by research firm CoreLogic.
Among the 392 U.S. housing markets that CoreLogic analyzed in June, it found 45 to have a greater than 50 percent chance of seeing home prices fall within the next year. When the firm conducted the same analysis in May, only 26 markets fell in the category. In just a month, the number of housing markets with a 50 percent or more chance of seeing lower home prices surged by 73 percent.
“The probability of a price decline has intensified in recent months as mortgage rates continue to surge and consumer confidence is shattered by high inflation and fears of recession,” Selma Hepp, deputy chief economist at CoreLogic, said to Fortune.
Among the 392 regional markets, four were identified to have an over 70 chance of a price dip. This includes Lake Havasu City in Arizona, Bremerton and Bellingham in Washington, and Bend in Oregon.
The analysis identified 41 markets as having a 50 to 70 percent chance of price dips, 36 markets with a 40 to 50 percent chance, 152 markets with a 20 to 40 percent chance, and 159 markets with a 0 to 20 percent chance of a price dip.
CoreLogic also deemed 70.7 percent of the 392 housing markets as “overvalued” in April, up from 67.9 percent in March and 64.7 percent in February.
Decreasing Buyer Interest
The high price of homes is depressing buyer interest as evidenced by the Redfin Homebuyer Demand Index, which is a measure of requests for home tours and other home-buying services from Redfin agents.
The seasonally-adjusted index fell 16 percent year-over-year for the week ending June 19, which is the largest decline since April 2020. Touring activity was 6 percent below the start of 2022 as against a 24 percent increase the same time last year.
“High mortgage rates have kicked a lot of buyers right out of the market. This means sellers need to price their home at whatever they are okay walking away with, because they might only get one or two offers now,” Boston Redfin real estate agent Robin Spangenberg said in a June 23 news release.
According to an analysis by ATTOM, a leading curator of real estate data nationwide for land and property data, New Jersey, California, and Illinois account for 34 of the 50 counties most vulnerable to a potential decline in housing markets. The rest of the counties are scattered mostly along the East Coast and the Midwest.