The residential real estate market rallied at a near-record pace from the start of the COVID-19 pandemic to just over a year ago. According to the S&P Case-Shiller price index, housing prices rose nearly 20% some months year over year during that period. In several large cities, the figure was nearly 30%. People could relocate to places where they wanted to live and were often far from their companies. Mortgage rates at 3% made houses more affordable. A spike in mortgage rates to over 6% late last year, caused by increases in interest rates by the Federal Reserve, helped end the run.
Some housing markets have remained healthy, but interest rates have hurt some badly. Many of these with eroding prices are some of the most expensive in the country based on median home value. According to Realestateagents.com, from the fourth quarter of 2021 to the fourth quarter of 2022, the median sales price of a home for sale dropped 6.1% to $1,230,000 in San Francisco and 5.8% in neighboring San Jose to $1,557,500. These are the two most expensive housing markets in America. Some people left these cities in 2020 and 2021 because they were too expensive.
A number of the people who left the San Francisco metro moved inland. One city that benefited was Farmington NM, where prices rose 20.3% during the period to $261,300.
The geographic area that benefited the most from home sales, by far, was Florida. In Northport FL, prices rose the most during the measured period, up 19.5% to $520,000. Prices in Naples rose 17.2% to $802,500. Prices in Punta Gorda rose 15.2% to $392,800 and were up 14.5% in Deltona to $353,800.
It will take several months, and perhaps as much as a year, to see if high mortgage rates will undermine other market prices. At the same time, the high prices in San Francisco and San Jose are likely to cause problems there.
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