The housing boom is over in nearly every part of the country. The number of home sales has dropped along with prices. No city is better evidence than Las Vegas, where sales dropped 51.8% in November from the same month a year ago. Las Vegas was one of the real estate boom markets recently as people left large cities in the West to find less expensive cities that might also have lower costs of living. This decision has caught up to home buyers financially unless they intend to hold their homes for long periods. At some point, the home price market will recover, as it always has.
Home unit sales have also dropped sharply in other cities inland from the West Coast. Sales dropped by a huge amount in Salt Lake City (-49.9%), Stockton, CA (-49.8%), and Oxnard, CA (-48.7%), according to a new study by Redfin. The only other city with such a sharp drop was San Jose (-50.1%) which is the most expensive city in the US based on median home value. It is one of the few metros where this figure is above $1 million.
The Redfin study also pointed out that two other metrics have worsened for home buyers. Multiple home bids have dropped in many cities, which tends to depress prices. And the number of people who walk away from contracts has also jumped in many metro areas.
Homeowners, particularly those who bought homes very recently or want to sell homes now, are in a bind across most of the country. The surge in home prices for two years ended in the last few months as mortgage rates surged from 3% to 6% in months. This can be blamed on the Federal Reserve, which has aggressively raised interest rates to bring inflation under control. So far, that has not worked. This means mortgage rates could be high for at least the midrange future.
The current home markets do have one blessing. Home prices will not collapse as they did in 2008 and 2009. During that period, hundreds of thousands of adjustable-rate mortgages were given to people with poor credit. When the interest on these loans adjusted upward, they could not make monthly payments. This caused a tsunami of defaults and foreclosures.
For people who have seen the value of their homes drop recently and both unit sales and prices have fallen, the fact that this is not The Great Recession holds little comfort.
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