Steeper mortgage rates and priced-out buyers paved the way to a slightly cooler housing market in Seattle and other major cities this spring, hinting that the booming post-pandemic seller’s market may have an expiration date.
Although the market appears to be shifting slightly in favor of buyers, aspiring U.S. homeowners shouldn’t expect to see lower home prices or interest rates anytime soon.
There is a silver lining, however. While home prices aren’t likely to decrease, projections by CoreLogic show annual price appreciation slowing to 5% by May 2023.
This would be a significant change of pace from the current home price growth rate, which surged nationwide by more than 20% over the last 12 months ending in May, according to the CoreLogic Home Price Index.
Month over month, the increase was 1.8%, fueling the momentum of home price growth over the last decade.
Prices for single-family homes in the state of Washington increased by 10% year over year in May. However, the CoreLogic Market Risk Indicator (MRI) predicts that the Bremerton-Silverdale, Bellingham, Tacoma-Lakewood and Olympia-Turnwater markets are at “very high risk” (70%-plus probability) of a decline in home prices over the next 12 months.
Florida registered the highest year-over-year home price growth, up 33.2%, followed by Tennessee at 27.4% and Arizona at 27.3%. The District of Columbia ranked last for appreciation at 4.3%, although CoreLogic forecasts its price growth to rise slightly by May 2023.
Tampa and Phoenix led the country in gains on a metropolitan level, with home prices up 33.4% and 28.7%, respectively.
Even as surging interest rates suppress the demand for housing, CoreLogic suggests that motivated buyers may have less competition and more opportunities ahead.
“Slowing home price growth reflects the dampening consequence of higher mortgage rates on housing demand, which was the intention,” said Selma Hepp, deputy chief economist at CoreLogic.
With monthly mortgage expenses skyrocketing by roughly 50% in a matter of months, fewer buyers are competing for continually limited inventory, Hepp noted.
“And while annual home price growth still exceeds 20%, we expect to see a rapid deceleration in the rate of growth over the coming year,” she added. “Nevertheless, the normalization of overheated buying conditions should bring about more of a balance between buyers and sellers and a healthier overall housing market.”