It’s been quite a turnaround for the once-hot housing market: Home prices are already falling in many cities, and there’s more where that came from.
New data from real estate company CoreLogic predicts the cities that are most at risk of home price declines over the next year. Here are the top five:
- Crestview-Fort Walton Beach-Destin, Florida
- Bremerton-Silverdale, Washington
- Bellingham, Washington
- Boise City, Idaho
- Reno, Nevada
Each city on the list has a more than 70% chance that prices will fall, according to CoreLogic’s analysis.
In some cases, price declines are already underway. In August, home prices in Boise City were 3% lower than they were a year earlier, according to data from real estate brokerage Redfin. The city was also named by home-financing startup Knock as one of a handful of places where homebuyers now have the advantage over home sellers — a clear sign of a major shift in the real estate market there.
High mortgage rates push home prices lower
Mortgage rates have been a major driver of home price reductions over the past few months. The average fixed rate on a 30-year mortgage climbed to 6.7% last week. That’s more than double the average fixed rate on the same mortgage at the beginning of the year.
As borrowing costs rise, more and more buyers are pulling out of the market. That’s good news for those who can still afford to buy, because sellers are adjusting accordingly by cutting prices: “They understand that potential buyers can’t afford the price they want due to the surge in mortgage rates,” Moody’s Analytics chief economist Mark Zandi tweeted Tuesday.
Of course, it’s still a seller's market in many ways (nationally, prices are still higher than they were last year), and buyers may be forced to compromise in some way, either by opting for smaller homes or choosing a home in a more affordable location.
The other option, of course, is to wait and see if home prices fall further down the line — which is exactly what many housing forecasts expect to take place.