The US housing market is crashing and soaring at the same time. It all depends on where you live.
The US housing market is crashing and soaring all at the same time as pockets of the market see divergent trends.
Home prices on the West Coast have plunged as much as 10%, while homes in the East have surged.
The home price trends have been driven by mortgage rates, little supply, and broader economic trends.
The US housing market is experiencing both a crash and a boom at the same exact time, and it all depends on where you live.
According to data from Black Knight, home prices on the West Coast are plunging at the same time home prices on the East Coast are surging. The split between rising fortunes or sinking home values essentially depends on whether the home is located east or west of the Rocky mountains.
From January 2022 to January 2023, home prices fell 7.5% in Seattle and dropped 10.3% in San Francisco. At the same time, home prices surged 12% in Miami and jumped 9.3% in Orlando. Even Buffalo, NY saw home price values rise 8.3% on an annual basis in January.
Except for Austin, Texas, 37 of the biggest metro areas east of Colorado saw home prices rise year-over-year in January. Meanwhile, all 12 of the major housing markets west of Texas saw home prices fall over the same time period.
Such a split in the US housing market is unprecedented. In the US housing crisis of 2007 and 2008, home prices dropped in 134 out of the 153 metropolitan areas, and the select few pockets of strength saw home prices stay essentially flat, not rise like they are today.
"We've never seen anything quite like this where it's so stark, west to east," Black Knight vice president Andy Walden told The Wall Street Journal.
The unprecedented nature of the bifurcated housing market is driven by a number of factors that stem from the COVID-19 pandemic, which saw a boom in housing demand at a time when the supply of homes was limited.
Fast forward to today, and supply is still low, while mortgage rates have soared to levels not seen in more than a decade, making it more expensive for prospective home buyers. That means housing markets that have a supply of relatively affordable homes, such as Buffalo, NY and Hartford, Connecticut, have seen steady price gains.
But in areas of the market that were already suffering from sky-high home prices, like in San Francisco and Los Angeles, there has been room for home prices to fall. And a wave of layoffs at high-profile technology companies that are mostly concentrated in West Coast cities has removed potential buyers from the market and has likely sparked an uptick in homes for sale.
To be sure, West Coast home prices had room to fall after experiencing dizzying gains over the past decade. Home prices in San Francisco soared 112% between 2012 and 2020, nearly doubling the national gain of 58% during that same time period, according to data from S&P Dow Jones Indices.
The pain seen in West Coast housing prices might take time to spread to the East Coast, if it does at all, given that the supply of homes remains extremely limited. At the same time, the millennial generation and Gen Z represents a large swath of prospective buyers that could help keep any future price declines limited.
That's as long as mortgage rates don't surge even higher. The average 30-year fixed mortgage rate was at 6.42% last week, well below its one-year high of 7.08%, according to data from Freddie Mac. That represents some relief for prospective home buyers.
Read the original article on Business Insider