After having many good years, the U.S. housing market is slowing down. According to new data from the American Enterprise Institute (AEI), home price growth in July slowed to just 1.8 percent year-over-year, the weakest pace since the think tank began tracking the data back in 2013.
For buyers, this may finally be a chance for them to see positive results, however for sellers, it brings disappointment as houses will now take longer to get sold and the offer for houses will be at much lower rates.
Why Prices Are Cooling
Several factors are behind the slowdown:
- Higher Mortgage Rates – Monthly payments have increased due to rates that are close to their highest levels in more than 20 years, which has forced many purchasers out of the market.
- Economic Uncertainty – Many people are concerned about the rising costs of inflation, job security and an increase in the cost of living. This has made people more cautious when it came to buying houses.
- Rising Supply – As prices began to decrease, there are more houses being pushed on the market
All these factors have moved the market from favouring sellers to one that’s starting to move towards favouring buyers.
Who Wins in This Market?
Not everyone loses in a slowing market. Here’s who could benefit:
- First-Time Buyers: Those who have been trying to purchase a house for many years, may finally see homes within their budget.
- Renters Ready to Buy: Renters may now find easier to purchase the home and become the owner, as the competition is now less.
- Buyers With Cash: All those people who are cash buyers, will be able to negotiate better deals.
Who Loses the Most?
On the flip side, certain groups may feel the pain of this shift:
- Recent Homebuyers: All those people who purchased houses in 2022 or early 2023 at high prices, may see that the value of their homes may decrease
- Sellers Expecting Top Dollar: Compared to a year ago, listing a house now may result in far fewer bids.
- Flippers and Speculators: It is considerably more difficult to make rapid resale gains when growth is sluggish.
The Hottest Housing Metros Right Now
Certain markets are still doing well even though the overall trend is slowing down. Demand is stable or even increasing in the following cities: Miami, Florida: Continued to be driven by high migration and foreign purchasers.
- Tampa, Florida: Market fuelled by immigrants and international buyers.
- Charlotte, North Carolina: A burgeoning IT and financial centre that attracts younger workers.
- Phoenix, AZ: Demand is still there, but it is growing more slowly than it did during the boom.
- Nashville, Tennessee: Known for its cultural richness and job expansion. These cities have a significant job market, and the cost of living is lower than other areas, this attracts newcomers.
The Coldest Housing Metros
San Francisco, California, is one of the coldest metro areas. Demand has drastically decreased due to high costs, tech layoffs, and remote work schedules.
- Seattle, Washington: A similar situation, with declining prices and sellers having trouble finding people to purchase homes.
- Denver, Colorado: The increase in expenses and decrease in employment is having a negative effect of the market.
- Las Vegas, Nevada: As purchasers retreat, Vegas, which is sensitive to changes in the economy, is cooling.
These metro areas are currently seeing the worst slowdowns after experiencing enormous increases in housing values between 2020 and 2022.
What This Means for Buyers and Sellers
Fortunately, buyers can benefit from this as they will now be able to purchase houses at rates they can afford. However, for sellers, this may be seen as a negative as the reduced pricing will result in them taking a knock.