Published by Forbes.com | November 28, 2022
Places where home prices shot up due to out-of-towners moving in with big budgets are now seeing prices rapidly decline.
Home-price growth has slowed fastest in pandemic boomtowns including Phoenix, Austin, Texas and Boise, Idaho as high mortgage rates and an uncertain economy deter would-be buyers. This is according to a new report from Redfin, a technology-powered real estate brokerage.
Austin’s median price per square foot was up 1.3% year over year in October. That’s down from about 24% year over year in February, when mortgage rates were still hovering under 4%, near record lows. And in Phoenix, price per square foot was up 6% from a year ago, down from nearly 29% in February. Those 23-percentage-point drops are the biggest among the 99 most populous metros from February to October 2022. Redfin compared October to February because in many metros, that’s when the housing market was near its peak in terms of demand and competition.
Austin and Phoenix are both places where home prices soared during the pandemic-era home-buying frenzy as remote workers flocked from expensive coastal cities to more affordable Sun Belt destinations. Las Vegas, Boise and Sacramento are also among the top 10 metros where price growth is slowing fastest.
Phoenix, Austin and Las Vegas were all among the metros that gained the most new residents in 2021, and Phoenix, Las Vegas and Sacramento all consistently rank on Redfin’s list of most popular destinations for home buyers moving in from out of town. Boise and its suburbs have been among the fastest-growing cities in the country over the last few years, attracting many new residents from California. Out-of-towners with big budgets helped drive up home prices in those popular destinations in 2021 and 2022. Home prices have increased more than 30% over the last two years in Phoenix, Austin and Boise, with the typical home now selling for nearly $500,000 in all three.
“The forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that saw home prices skyrocket over the last few years,” said Redfin senior economist Sheharyar Bokhari. “Home prices can only rise by double digits for so long before the growth becomes unsustainable. High rates and stumbling tech stocks are making it unsustainable quite quickly, especially in destinations popular with tech workers. Plus, many of the out-of-towners with big budgets who wanted to move into those places already have.”
Austin Redfin agent Maggie Ruiz said the pandemic home-buying boom drove prices up so much that her area has become unaffordable for many locals, and she’s noticed migration into the area and investment purchases slowing significantly.
