Japan’s fastest cooling housing market

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A cooling housing market has hit these metropolitan areas hardest.

Key Point

• Rising interest rates will drive some homebuyers out of the market.
• Higher rates mean fewer buyers competing for the same property.
• The cooling market can spread slowly.

Real estate and real estate companies continue to cut jobs, but it’s clearly not a mirage. The housing market is certainly cooling. another sign? Real estate giant Redfin has seen its share price drop nearly 92% since last year.

Home prices are still higher today than they were before COVID-19 changed the world, but demand is slowing and prices are falling. Redfin recently released data showing which markets are cooling the fastest. What used to be a seller’s market is rapidly turning into a buyer’s market in the following regions of the country:

rising interest rates

The most obvious reason for the market cooling is rising interest rates. The Federal Reserve will raise interest rates in response to inflation concerns. The higher the interest rate, the fewer people competing for the same asset (in this case, a house). Fewer buyers fighting over a home means fewer bidding wars and cheaper prices.

Take Austin, Texas as an example of how rising interest rates have dampened buyer enthusiasm. A year ago, if a buyer bought her $500,000 home in the city, the 3% interest rate would bring the principal and interest payments to $2,108 per month. Today, that same mortgage has an interest rate of about 6%, and his monthly principal and interest payments come to $2,998. The surge in payments is enough to make some buyers ineligible for mortgages, while others hesitate to jump into the fray.

Former popular destination

With COVID-19 raging and more people working from home, I realized I could live anywhere as long as I had a virtual job. Migrant worker hotspots include Las Vegas, Sacramento, Phoenix, and Northport, Florida. With housing prices soaring, packing up a moving truck and moving to another state is becoming too expensive for many homebuyers.

still warmer than usual

Again, home prices are still higher than normal and much higher in some areas. However, the cooling of the market indicates that the trend is likely to spread to other parts of the country. Homes have already been on the market too long, forcing more home sellers to lower their asking prices. Taken together, these indicators suggest that his Fed expectations of lowering consumer prices may be working.