Home prices hit all-time highs in 2022, with the median price increasing by 50% from January 2020.
High mortgage rates have slowed down the housing market considerably, with Redfin predicting that the median U.S. home price could drop by close to 4% in 2023, posting the first year-over-year decline in a decade.
Home sales will also decline, falling to the lowest level since 2011, a drop of 30% from 2021. While many areas are already experiencing a decline in prices, some are expected to be even more expensive this year.
Places where prices will drop the most
Pandemic migration hotspots like coastal cities and those in the Sun Belt saw the biggest increases in the housing market frenzy in the aftermath of COVID-19.
Home prices in Malibu, California surged by 82% from the first quarter of 2021 to 2022. The East Coast also saw record gains, with the average home price of the Hamptons in New York increasing by 25% and the number of homes available falling to a record low.
Home prices went up the most in cities such as Austin, Boise, and Phoenix, areas that were prime destinations during the initial phase of the pandemic.
These places are expected to see the most volatile prices since there is a lot more room for prices to drop compared to areas that didn’t see as much growth.
Prices that will see prices go up
Climate-risky areas like the hills of California and oceanfront property in Florida will see prices continue to go up primarily due to high insurance costs.
According to Redfin’s data, disaster insurance premium rates will continue to rise, offsetting any price declines in these areas.
Insurance premiums in Florida increased by 33% last year, and are expected to go up even more due to Hurricane Ian, the deadliest hurricane to strike the state of Florida since 1935. The hurricane was also the costliest in Florida’s history, causing $113 billion in damages.
Many insurers have stopped issuing policies on high-fire-risk homes in California. This means that the only insurance companies homeowners in these areas have to access are two to three times more expensive.
Even FEMA flood insurance premiums have gone up. With disaster insurance required for a mortgage in these high-risk areas, the majority of those who can afford these types of homes are the wealthy all-cash buyers.
Purchasing a home is the most expensive purchase many people will ever make in their lives.
When taking into consideration the total expenses of homeownership, make sure you take into account insurance, property taxes, and maintenance fees before you pull the trigger on buying a home.
The dramatic increase of insurance premiums will offset any home price decreases seen in some areas. Buying a home should be based on your personal financial situation and it is important to budget all the costs you can expect to incur.
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Source: www.usatoday.com
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