Today everyone hears of the hot housing market with home prices soaring, but this is not the case in some areas of the country. The regional housing market is being to see a big uptick in price cuts which means the housing market is beginning to slow down.
According to Redfin, in May 2022 there were more price cuts than compared in May 2021 among the 108 regional housing markets they measured. In fact, only six of the regions did not see price cuts. May 2022 saw 25.7% of the listings with price cuts whereas only 15.7% had price cuts in May 2021. Of the 108 regions, 29 of the regions saw over 30% of its home listings cut in price.
The regions that are seeing these price cuts first are the regions that shot up the most in prices during the pandemic. Provo, Utah was on top of the list with 47.8% of its home listings showing price cuts between May 2021 and May 2022. The top ten regions were Tacoma, WA with 47.7%, Denver, CO at 46.9%, Salt Lake City, UT at 45.8%, Sacramento, CA at 44.3%, Boise, ID with 44.2%, Ogden UT with 42.6%, Portland, OR with 42%, Indianapolis, IN with 41.9%, Philadelphia, PA with 41.2% and Seattle, WA with 40.6%. New Orleans made the top 20 with 36.4% of its home listings seeing price cuts.
Professionals in the industry say that this cooldown is by design. The Fed announced they were going into inflation-fighting mode. This can be seen with the mortgage rates rising. The average 30-year fixed mortgage rate went up from 3.2% to 6.7% over the past six months. This coupled with record home price appreciation has pushed many buyers out of the market. Those borrowers who must meet strict debt-to-income ratios have lost their mortgage eligibility. This has caused a shift in the U.S.housing market from a hot market to a cool-down market.
The cooling in the housing market is set to only intensify in the coming months. According to Freddie Mac’s deputy chief economist Len Kiefer the housing market has entered into the “most significant contraction in activity since 2006.”
“I’d say if you are a homebuyer…or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again,” Fed chair Jerome Powell told reporters last week.