Americans looking to buy a home in much cheaper markets might want to try their luck west of Texas, according to a real estate analysis released this week.
Home prices fell in 12 of the largest metro areas west of Texas last month, including 10.5% in San Jose, California; 10.3% in San Francisco and 7.5% in Seattle, a report from mortgage analytics firm Black Knight shows. Prices in 40 major cities west of Colorado, meanwhile, rose during the same month, including 12% in Miami and 9.3% in Orlando, Florida, and 8.3% in Buffalo, New York.
The up-and-down prices are the result of the Federal Reserve’s ongoing moves to combat inflation, said NerdWallet home and mortgage expert Holden Lewis.
“House prices were so high out west just to start, and then when the Fed cut interest rates really low at the beginning of the pandemic that just really allowed people to bid up the prices of houses,” Lewis told CBS News. “Farther east, home prices didn’t start out so high, so when they rose there was still kind of a reservoir of people who could afford to buy homes, and that kept prices a little bit level.”
The Fed’s monthslong battle with soaring inflation has helped push mortgage rates skyward, thus increasing borrowing costs for house hunters. What’s more, demand for homes skyrocketed in 2022 and builders couldn’t keep up with the pace, driving prices for existing homes even higher.
Buyers eager, sellers not so much
The frenzied spring home-buying season is in full swing across the country. Real estate agents anticipate house hunters will ramp up their efforts over the next few months to buy a home. Homeowners, meanwhile, are expected to be hesitant to list their property, deterred by the prospect of signing a new mortgage at an elevated rate.
Home prices increased 3.8% year-over-year in January, according to the most recent S&P CoreLogic Case-Shiller Index report. The nation’s median home price hit $363,000 in February, according to the National Association of Realtors. Economists said increases in mortgage rates in the coming months will largely determine whether home prices will soon fall below that figure.
“Interest rates are likely to remain elevated for some time, even if they do not rise much further,” Kieran Clancy, a senior U.S. economist at Pantheon Macroeconomics, said in a research note Wednesday. “So, an improvement in affordability will need to come via a decline in prices.”
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