Home prices of U.S. metro areas that surged during the pandemic-era homebuying frenzy are now reversing course and decelerating against a backdrop of high mortgage rates and economic uncertainty.
For instance, the median price per square foot in Austin, Texas rose 1.3% in October from a year ago, down from +24% Y/Y in February, when mortgage rates were hovering near all-time lows, according to a Monday report from digital real estate brokerage Redfin.
And in Phoenix, Arizona, price per square foot gained 6% in October from a year before, compared with almost +29% Y/Y in February, again signaling that two-decade high mortgage rates continue to weigh on home-buying demand.
Those two metros were put in the spotlight because their Y/Y home price decelerations were the largest among the 99 most populated U.S. metros. Austin and Phoenix were both places where home prices shot up during the pandemic housing boom, as remote workers flocked from coastal cities to less expensive Sun Belt locations, Redfin noted.
San Jose, California (down 22 percentage points), Las Vegas, Nevada (down 21 percentage points) and Boise, Idaho (down 20 percentage points) were also among the top 10 metros where price growth slowed the quickest.
“Home prices can only rise by double digits for so long before the growth becomes unsustainable," said Redfin Senior Economist Sheharyar Bokhari. 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.”
Previously, (Nov. 23) new home sales unexpectedly rose in October, sale prices increased.