The U.S. real estate market has been unusually strong for two years. Prices have risen by 20% most months during this period, year over year, according to the carefully followed S&P Case-Shiller housing price index.
The pace of home price growth has varied considerably from metro to metro. People migrated from extremely expensive markets on the two coasts. Among these are New York City, San Jose, and San Diego. These people often moved to less expensive cities inland which include Boise and Memphis. This slowed real estate price growth in the larger cities and accelerated the growth in the places people moved in great numbers.
Americans have been able to be more mobile in part because of the COVID-19 pandemic. Millions of people worked from home, and some still do. Employers were forced to close offices entirely because of the danger of the virus. Some employees have been told they will never need to return to offices.
Another factor in mobility was low interest rates. The rate on 30-year fixed mortgages dropped to under 3% last year, which made houses more affordable. That has changed radically recently. Rates have risen well above 5% in some parts of the country.
The S&P Case-Shiller data shows prices increasing and decreasing both nationally and for the country’s 20 largest cities.
In two cities, prices rose over 30% in June, the month covered most recently in the S&P Case-Shiller data. These were Tampa, up 35%, and Miami up 33%. Ironically, Florida homes prices were decimated in the real estate downturn of The Great Recession, particularly 2008 and 2009. Foreclose rates in Florida soared over that period.
Other cities had extremely slow price growth in June compared to the market as a whole. Prices rose only 10.4% in Minneapolis and 10.8% in Washington DC.
What happens to home prices for the balance of this year and into 2023? If the past offers any roadmap, it is that the markets where home prices rise the fastest in good times also fall fastest when the economy gets soft.
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