Fortune and Moody’s Analytics Report Some Housing Markets Could See Over 20% Price Declines

By Douglas Katz – 06/13/2022

Fortune reported today that many markets will see priced flatline in the next year and some markets could drop over 20%.  According to Fortune’s reporting of the Moody’s study, “Through the first quarter of 2022, national house prices are “overvalued” by 24.7%. That’s up from the fourth quarter of last year, when Moody’s Analytics determined national house prices were “overvalued” by 20.9%.”  They clarified that this does not mean the entirety of the US housing market will plunge by over 20% but rather factors such as affordability, income and inflation will inhibit further growth.  That said, there are some markets that are so significantly overvalued where actual declines in value and slowed or halted growth will be the norm.

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The markets that they identified as overvalued and likely to see declining home prices in order are

  1. Boise, Idaho
  2. Colorado Springs, Colorado
  3. Las Vegas, Nevada
  4. Coeur d’Alene, Idaho
  5. Tampa, Florida
  6. Atlanta, Georgia
  7. Fort Collins, Colorado
  8. Sherman, Texas;
  9. Jacksonville, Florida
  10. Idaho Falls, Idaho
  11. Lakeland, Florida.
  12. Greeley, Colorado
  13. Longview, Washington
  14. Charleston, South Carolina
  15. Albany, New York
  16. Denver, Colorado
  17. Clarksville, Tennessee
  18. Greensboro, North Carolina
  19. Charlotte. North Carolina
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In addition to market pricing data, the article provided some great information for further validation of the growing headwind for home prices.  Per Moody’s Analytics chief economist, Mark Zandi, “we’ll see home sales continue to fall sharply as more home shoppers balk at record home prices. But it isn’t just because home prices got too high. Over the past six months, the average 30-year fixed mortgage rate has spiked from 3.2% to 5.85% as the Fed gets serious about tackling inflation. That’s causing many borrowers, who must meet lenders’ strict debt-to-income ratios, to lose their mortgage eligibility.”

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Before anyone panics, remember that this is about market cycles.  Mortgage rates and home prices predictably rise and fall on an unpredictable timeline.  This last cycle was exceptionally long and pronounced so the rapid shift has people beginning to panic and freak out, which is the worst course of action.  If you have to undertake a transaction, be smart, decisive and flexible.  These changes are expected over the next year, not the next week.

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