Home prices have skyrocketed higher for most of the last two years. In some markets, prices have risen by sums well into the double digits.
There are several reasons for the increase. The first is that low interest rates have made housing more affordable. The rates on 30-year fixed mortgages dropped below 3%.
Another reason for the rise in some cities is that Americans became more mobile during the COVID-19 pandemic. People who could work from home often migrated from expensive coastal cities like New York and San Francisco to cities inland which included Boise and Memphis. Since many people can work from home permanently, this migration may continue.
The dynamics of the housing market have changed recently. Interest rates on mortgages have soared to over 5%. Home prices have risen so high in some cities that they are no longer affordable.
One of the gold standards of the home price market is the S&P Case-Shiller index. It has shown that most months this year, national home prices have risen 20% a month, year over year. In several markets, led by Tampa, Miami, and Phoenix, the figure has been above 30% some months.
Month over previous month in June several home markets began to see erosion in home prices. In June 2022 over May 2022, national home prices rose 0.6%. Two markets remained very strong. For the period, Miami prices were up 2.3%. For Tampa, the figure was 2.2%.
The markets where homeowners were not so fortunate were San Francisco where they dropped 1.3% and Seattle where they dropped 1.9%. Traditionally, these two cities are among the most expensive in America.
The question today is whether market prices will follow Seattle and San Francisco in the same direction. If so, the two year housing market boom is over.
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