Overheated housing hotspots on the West Coast are cooling off faster than any other in the country as higher mortgage rates trigger a price correction nationwide, according to an analysis conducted by real estate firm Redfin.
Of the 100 most populous U.S. metropolises, the Seattle housing market cooled the most from February through August this year — a period when mortgage rates rose. Las Vegas ranks second on the list of steepest delays, followed by San Jose, California.
Nine of the top 10 cities with the dubious distinction were in the western half of the country, including four in California. North Port, Florida, was the only East Coast market to top the list.
“These are all places where home buyers feel the sting of rising house prices, higher mortgage rates and inflation. They’re slowing down partly because so many people have been priced out and partly because last year’s record low rates made them unsustainably hot,” said Redfin Chief Economist Daryl Fairweather.
“The good news is that the slowdown dampens competition and gives those who can still afford it more bargaining power,” he added.Read:The Dow tumbled 500 points because Jerome Powell’s Fed ‘isn’t going to blink’
Redfin based its rankings on calculations related to year-over-year changes in home prices, price declines, home inventory levels, pending home sales, sale-to-list ratios and the proportion of homes that went off the market within two weeks, the firm said. .
Mortgage rates have skyrocketed since January as the Federal Reserve continues to hike interest rates that make it more expensive to borrow. A 30-year mortgage was 6.29% this week, more than 3.40% more than a year ago.
The median home price in Seattle is a whopping $775,000, meaning the typical monthly mortgage payment is $4,400. That’s more than $1,000 a month over went, rates were closer to 3% at the start of the year.
“Many sellers are unable to get the price they want because buyers don’t want to compete with other offers when mortgage rates are double what they were a year ago,” said Seattle Redfin agent David Palmer. “That means there are fewer sellers listing their homes and fewer buyers making offers on the ones that do come on the market.”Read:McDonald’s to offer ‘adult’ meal boxes with bizarre little figurines
The company noted that many cities on the list, including Las Vegas, Phoenix, Sacramento and North Port, were “relocation hotspots” during the pandemic-era shift to remote work. As monetary policy tightens and more companies return to the office, those markets cool quickly.Read:Biden to announce fee transparency rules for airlines
In addition, cities with large populations of tech workers are seeing less demand because employee compensation is often tied to stocks — almost all of which have fallen significantly in recent months.
A growing number of analysts are warning of a housing correction. This week, Pantheon economist Ian Shepherdson said house prices could fall by 20% by the middle of next year if the market recovers.