These 20 Housing Markets Are Cooling the Fastest, According to Redfin

According to the latest data from red fin, the housing market is slowing in several major US metropolitan areas. The report included the top 20 spots in the U.S. and ranked them by number of home sales, home prices, supply-to-demand ratio and how long it took a listing to move to pending sale status.

After two years of record data, the latest report shows a sharp change in direction for many of the major US housing markets. In particular, cities that led the pandemic-fueled home-buying frenzy are becoming less attractive to homebuyers put off by high home prices now coupled with rapidly rising mortgage rates .

The latest data and news coverage spinning around housing correction has caused a lot of concern among real estate investors, and rightly so. The question is: how should you react to this?

The West Coast is slowing down The fastest

The most obvious takeaway is the relaxation of popular West Coast housing markets. Seattle, in particular, is experiencing the most dramatic decline, with home sales down 34% year over year in August. It’s a stark contrast to the 23% increase in the number of home sales in the city, up to February 2022, which will show how quickly things have changed.

Seattle is not an isolated example either. Several major cities in California are experiencing a similar drop in buyer demand and, therefore, home prices. Sacramento, San Jose, San Francisco and San Diego are experiencing double-digit percentage declines in home prices. Below are the 20 markets that are experiencing the fastest cooling, according to Redfin.

Redfin's 20 Fastest Cooling Markets

The West Coast has had a problem with rising unaffordability for a long time, and the pandemic only exacerbated an existing trend. It’s no surprise that buyers are already feeling the pressure of high house prices and are now reconsidering buying in these areas, especially since the typical mortgage interest rate is almost double what it was at the start of the year.

According to Redfin’s chief economist Daryl Fairweather“These are all places where homebuyers are feeling the sting of rising home prices, higher mortgage rates and inflation very strongly. They’re slowing in part because priced out of so many people and in part because last year’s record low rates made them unsustainably hot.”

Similar effects are seen in areas that became popular pandemic relocation sites, particularly Las Vegas, Nevada and Phoenix, Arizona. These markets made headlines in recent years as the best cities for professionals migrating from expensive California markets. This year, however, they are experiencing the same problems. Housing markets in these metros quickly cashed in, and there are many signs that buyers no longer see these destinations as attractive alternatives to overheated and overpriced coastal markets.

Las Vegas, for example, peaked at $440,000 in median home prices this summer, up from $289,000 in February 2020. Since then, the median home price has fallen sharply to $405,000.

Las Vegas real estate statistics
Las Vegas Average Sale Price – Redfin

On the other hand, Phoenix peaked at $469,000 in May and has since fallen to $430,000. In February 2020, the median home price was $279,000.

Phoenix real estate market statistics
Average Phoenix Sale Price – Redfin

Does it make sense to invest right now?

It cannot be denied that with the real estate market cooling down, investing requires a more cautious and calculated approach. Seconds Bloombergthe first reaction to a market slowdown by investors is always an instinctive retreat, with landlords canceling contracts and flippers selling their stock to clear inventories.

Does that have to be you? Not necessarily. One thing to remember about this housing market is that it’s not about to crash, it’s right. With the right approach, you can still make a profit, whether you invest in long-term rental properties, short-term rentals, development, etc.

In a buyer’s market, consider the needs of the buyer and the benefits of the seller that will attract buyers who may be hesitant, given our higher interest rates.

If you are flipping houses, which is of course one of the most difficult strategies in a down market, looking for cash buyers is the most prudent thing to do at this time. According to Redfin CEO Glenn Kelman, accepting lower offers is the best strategy in a slower market to “accumulate interest expense and other maintenance costs as listings persist.”

If you are an institutional owner, you can choose now not to expand your inventory. It’s about waiting for the right moment when house prices drop further. As Mark Zandi, chief economist at Moody’s Analytics, explained to Bloomberg: “Institutional buyers are opportunistic. I’m sure they’re waiting, thinking they’re going to get a much better price for these properties in the not-too-distant future.”

While it’s easy to execute the wait-and-see strategy in 2023, there are still plenty of opportunities to be found in this real estate market. That’s why it’s more important than ever to become one BiggerPockets Pro Member to stay up to date with the latest news and proven approaches to real estate investing.

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Note from BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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