The Weirdest Housing Market May Be in For More Pain

Whats up everyone

As we know, unless you’ve been hiding under a rock, the U.S. housing market is all over the place.  While some places are seeing massive price declines, others are seeing multiple offers and home prices going way above asking.

Add to that a problematic economy that will only get worse if the US defaults on its debt, and we really have a mess of a housing market situation. 

And don’t get me started on the affordability crisis. Money is only getting more expensive and prices are still way too high. Is the American dream of owning a house over?

So, I thought today we could break it down to see which parts of the country are fairing better than others. And stay tuned until the end where we go through the possible scenarios if the US doesn’t pay its debts.

Let’s dive right in

“The wild pandemic-era housing market made price growth trends more local than they had been since 2009,” writes Redfin economist Taylor Marr.

This is a quote from Lance Lamberts latest article in Fortune titled One of the weirdest housing markets ever

Where he delineates between the different markets across our country.

Among the 400 largest metropolitan housing markets tracked by the seasonally adjusted Zillow Home Value Index, 174 markets in April were below their pandemic peak for local home prices. The other 226 markets had either climbed back to their pandemic peak, or set a higher peak altogether in April.

As we know, real estate is very localized. 

Prices are going down in the west and up in the east. He cites 2 reasons the housing market is so divided.

First – Western housing markets are simply more rate-sensitive. They have strained affordability after years of overheated home price growth, which makes them vulnerable to acute affordability strains whenever mortgage rates spike.

And Secondly – Western markets have a high concentration of tech jobs, which are vulnerable whenever the Fed moves into inflation-fighting mode.

“The fact that Miami prices are holding up well despite the national pullback in homebuying suggests the relative popularity of Florida is here to stay. Even though some employees are returning to offices at least a few days a week, the pandemic has given many Americans much more freedom on where they choose to live—and a lot of them are choosing places where shelling out $1.5 million for a run-of-the-mill home isn’t the norm,” wrote Taylor Marr, deputy chief economist at Redfin.

In this article, Lambert gets even more granular and shows us 11 maps of different states and how home prices are faring in each using the seasonally adjusted Zillow Home Value Index data.

In each map, the red represents a decline in home prices since the pandemic peak. The blue means local home prices in April 2023 were at their all-time high. So, let’s quickly go a few of them to see how weird our housing market is even within each state.

First we have California.

Among the 1,564 California ZIP codes tracked by Zillow, 98.5% are below their pandemic peak for local home prices; 1.5% of California ZIP codes were at their pandemic peak in April.

So even with all of the price reductions in most of California like in San Francisco where prices are down 8.42% from the pandemic peak, there are still places like Lost Hills CA in Kern County where prices are at an all time high.

Let’s move onto Texas. 

Among the 1,554 Texas ZIP codes tracked by Zillow, 69.6% are below their pandemic peak for local home prices, while 30.4% of Texas ZIP codes were at their pandemic peak price in April. 

It’s pretty wild to just look at the map and see so much blue. Almost a third of the state is seeing home prices at an all time high. And then you have Austin which shows a price decline of 10.29%.

Let’s take a look at my home state of Maryland where I can really see the granular differences by zip code.

Among the 424 Maryland ZIP codes tracked by Zillow, 46% are below their pandemic peak for local home prices, while 54% of Maryland ZIP codes were at their pandemic peak price in April.

Where I am in Montgomery County, right outside of DC, I can look at different Bethesda zip codes and see price differences. In 20817 which is a bigger Bethesda area, prices are at an all time high. But right next to it in 20816, Zillow shows a price decline of 3.26% from the pandemic peak. 

I’ll take it one step further and say it’s literally from house to house. If a house is priced right and shows well, it’s going in multiple offers and prices are way up. 

Other houses are sitting and having price reductions if they were over priced or show poorly.

And lets look at DC

Among the 22 District of Columbia ZIP codes tracked by Zillow, 21 zips are below its pandemic peak for local home prices, while 1 District of Columbia ZIP code was at their pandemic peak price in April.

Now I can give you empirical data to show this is literally different depending on each house. I just sold a house in 20007 that went $170,000 over the asking price and this map is showing a decline in home prices in 2007 by 3.86%. 

So, we need to take these maps as a general idea, but certainly not as blanket truth.

Let’s take a look at a couple of more states. If you live in any of these, comment below and tell us if they’re right. 

Among the 927 Florida ZIP codes tracked by Zillow, 76.2% are below their pandemic peak for local home prices, while 23.8% of Florida ZIP codes were at their pandemic peak price in April.

You would think that Florida would have more blue with all of the news about home prices going up in Florida but it looks like it’s mostly concentrated int the south by Miami.

And finally, look at North Carolina. 

Among the 722 North Carolina ZIP codes tracked by Zillow, 38.8% are below their pandemic peak for local home prices, while 61.2% of North Carolina ZIP codes were at their pandemic peak price in April.

It looks like the price declines are mostly in and around Raleigh and Durham. 

There are some other state maps cited in the article so if you want to take a look, I’ll post the link below.

The bottom line is even with Zillow’s new national home price forecast as measured by the Zillow Home Value Index (ZHVI), which says home prices will go up 4.8% between April 2023 and April 2024, we can see that this is too general and each state has its own price fluctuations even within the state. Forget about compared to the rest of the country.

And what about if the US doesn’t pay its debt? They extended the deadline and the effects are already happening. Mortgage rates are climbing again and a recession is imminent which will cause more unemployment and businesses (esp small businesses) to suffer. 

The stock market could drop or plunge which would affect retirement savings, 401k plans, college savings, and basically anything that is invested. 

With one kid in college and another there in a year, this really causes me anxiety.

Any way you look at it, an unstable US economy will cause more pain. 

In Redfin’s latest housing market update, Redfin Economics Research Lead Chen Zhao, explains why mortgage rates are on the rise. 

“People may be wondering why rates are surging as we come up against a potential debt crisis. Right now, the way investors are reacting is the driving force. Mortgage rates have increased over the past two weeks because it looks more likely that the U.S. government will avoid hitting the debt ceiling,”

“That may seem counterintuitive, but optimism is driving rates up because an economic crisis would lead to the Fed lowering rates as they try to prevent a recession. Financial markets felt the risk of default was unusually high for the last month or so, which caused rates to stay lower than they otherwise would have been. Now that Democrats and Republicans have come to the negotiating table and are making some progress toward a deal, rates are going up.”

This does seem counterintuitive in my opinion because if the U.S. cannot pay its creditors, interest rates on US debt would go up, creating higher interest rates. So mortgage rates, credit card rates, car loan rates all would be more expensive.

So what’s the bottom line? This is the weirdest housing market I’ve ever experienced after 20 years of being a realtor.

You can’t generalize an area, because it’s house by house. I’m seeing more cash buyers than ever and my buyers that are taking loans are very qualified to do so.

There is still so little inventory and a lot of my would be sellers are sitting on the sidelines with their low interest rate mortgages rather than sell and buy with a much higher one.

I’m not seeing foreclosures and short sales where I am in the DC area like we did back in 2009 and prices are still escalating above the list price.

So is this the new normal? Is money going to stay expensive as well as home prices? Is the American dream of owning your own home over? It’s not as if rent is cheap. At least where I am, it’s pretty expensive to rent as well.

What about where you are? Comment below and tell us what is happening where you are?  Also if you are thinking of buying or selling, let us know where you are and what you are experiencing. 

IT really is the best way for all of us to know what is really happening across our country.

If you want to see more about the possible consequences of the US deft default, check out this video.

Thanks for Reading

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