Pandemic Boomtowns Go From Hot Spots To Not-So-Hot Spots

The tide has turned, with a weak tech sector and persistently high mortgage rates, housing markets in tech hubs and pandemic immigration hotspots are cooling faster than elsewhere in the country. It’s from Recent research.

Austin, Texas, cooled most rapidly last year as its housing market retreated from its pandemic-era boom, according to Redfin analysis. The Fed started raising interest rates to combat inflation, and a year ago mortgage rates rose. After Austin is Seattle. Phoenix; Tacoma, Washington; and Denver. Las Vegas, Stockton, CA. San Jose, California. Sacramento and Oakland, CA round out the top ten.

Urgently, high interest rates, low supply and tech layoffs slow down demand for West Coast hubs

Homebuying demand and competition indicators fell sharply in tech centers such as Seattle, San Jose and Oakland. A typical San Jose home sold for just 0.6% up against a 12% increase in asking price in February. A year ago asking price – the largest percentage point decline in the country. Seattle lost his third biggest drop, down 1% from his 8% of last year’s asking price. Pending home sales were down 40% year-over-year in Seattle and 38% in San Jose.

Redfin asked agents to share how a surge in tech layoffs, a volatile stock market, and bank turmoil played a big part in the cooldown, noting that the coastal hubs are rapidly crashing for several reasons. I found it cold. Job cuts and volatile tech stocks are reportedly deterring buyers. Others attribute the slowdown largely to other factors, such as very low inventories. San Jose and Oakland are among his five largest metropolitan areas in the United States and are seeing the fastest declines in new listings.

The Tech Hub Housing Market Is Cooling Fast For Several Reasons

Tech stocks in chaos. Tech stocks fell more than 30% in 2022, but have risen slightly since then.The volatile tech stocks have hit the Bay Area and Seattle hard. Buyers employed in the tech industry often use stock earnings as a down payment.

Dismissal of technicians. Layoffs in the tech industry, which are primarily concentrated in the Bay Area and Seattle area, are widespread. Some buyers are declining searches or canceling deals out of fear of losing their jobs or losing them, said Shelley Rocha, her Redfin manager in the Bay Area. said. Other agents say layoffs and declining tech job prospects are preventing some first-time buyers from entering the market at all.

Low in stock. Many Bay Area and Seattle residents are put off by layoffs and a volatile stock market outlook.

House price hikes due to the pandemic are unsustainable. Home prices in tech hubs have skyrocketed over the years, especially during the pandemic, driving up prices for residents who don’t work for Google, Meta, Amazon, Microsoft, or other tech companies. With technology struggling and mortgage interest rates high, even more locals can’t afford a home.

High mortgage interest rates. Mortgage interest rates are around 6.4%. is this a good thing? No, because from late 2020 he’s more than double the all-time low of 3% that was common in early 2021. This has resulted in a significant increase in monthly housing payments in the expensive market. A typical Seattle homebuyer is now paying $4,210 a month at a 6.4% rate, compared to about $3,200 a year ago at his 3.5% rate.

Housing prices are still high. Home prices are falling in the Bay Area and Seattle, but are still high, largely due to limited inventory. Typical San Jose and Seattle homes sell for $1,250,000 and $710,000 respectively, compared to the national median $386,000. High mortgage rates exacerbate costs and drive out many would-be buyers.

These markets cooled sharply between February 2022 and February 2023, but with mortgage rates dropping from their peaks and supply remaining low, the focus is on competition for affordable homes. Some agents are

“The overall market looks good this week as we see fair and accurately priced home bidding,” said Lakshmi Penupochula, an agent for San Jose Redfin. “The overpriced listing is the one on the market.”

The failure of Silicon Valley Bank, which lent money to many Bay Area start-ups, has had mixed effects on the local housing market (the bank reportedly closed in March after the data timeframe for this report). went bankrupt). Redfin agents report that uncertainty about the stability of the banking and technology industries is making some buyers and sellers nervous. However, bank failures and turmoil surrounding other banks limited the Fed’s rate hikes to a modest amount last week.

The New York metropolitan area (66th for fastest-cooling markets) is also likely to be affected by banking disruptions, as many of its residents work in the financial sector. One-fifth are in New York, and finance is the city’s highest-paying industry. Banking instability could dampen demand for homes in the region as financiers worry about their industry.

Pandemic boomtown from hotspot to not-so-hot spot

Austin skyrocketed in popularity in 2021 and early 2022 as an influx of remote, suburban workers from expensive coastal areas took advantage of historically low mortgage rates.

But now, Austin’s homebuying competition and demand indicators are declining rapidly. Total supply of homes for sale in February increased 140% year-over-year, making it her second-largest increase in the US (only Northport, Fla., showed a larger increase). Pending sales fell 40%, and only 16% of homes he closed within two weeks of coming on the market in February, down from 38% a year earlier.

A surge in wealthy homebuyers pushed up local home prices, and subsequent rises in mortgage rates drove prices down for many more locals. Austin’s average price per square foot fell 13% year-over-year in his February, the biggest decline among major U.S. metropolitan areas, but it’s still higher than it was two years ago. Income needed to buy a house is typical local income.

The story is no different in Phoenix, Las Vegas, and Sacramento, where remote workers are pulling away from expensive neighborhoods for more affordable homes and cooler weather. Phoenix, Las Vegas, and Sacramento are all mainstays on Redfin’s list of most popular migration destinations, and have rapidly moved from relatively affordable to not-so-affordable during the pandemic, at least for existing residents. Did.

Now, the housing market in these boomtowns is taking a turn as interest rates rise. Technical issues are also contributing to slowing demand in these areas, as many remote workers suffer layoffs and their prospects. The Bay Area and/or Seattle are among the top departure locations for homebuyers moving to Austin, Phoenix, Las Vegas, and Sacramento.

The increasing proportion of home sellers lowering their asking prices shows how some of these markets are cooling off. In Phoenix, prices fell on his 70% of homes for sale in February, compared with 21% a year earlier, and his second largest rise in the U.S., compared with 13% a year earlier. hand.

Las Vegas and Phoenix also saw the largest increase in sellers offering concessions to attract buyers last year.

Connecticut, upstate New York and parts of the Midwest hold up the most in volatile housing markets

Hartford, Connecticut holds up the best, according to the analysis. The housing market isn’t exactly buoyant, with February pending sales down 16% year-on-year and new listings down double-digits. More than last year, the average price per square foot is up 8%.

Milwaukee is next, followed by two other Connecticut Metros and two Upstate New York Metros (New Haven, Bridgeport, Albany, and Rochester). Lake County, Illinois. McAllen, Texas. Wilmington, Delaware. And Chicago rounds out the top ten.

Homes in all these places are relatively affordable. Nine out of ten have a lower median selling price than the national median (Bridgeport is an exception). In other words, even if mortgage interest rates rise, your monthly mortgage payments won’t change as much as in more expensive areas.