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Home price growth is slowing at the fastest rate in some of the pandemic-era boomtowns where it saw the fastest growth over the past two years.
Median home price growth has slowed the fastest in Austin, Phoenix and San Jose, with fellow COVID-19 pandemic boomtowns Las Vegas and Boise also seeing significant slowdowns as buyers struggle with generationally high mortgage rates, according to a study released Monday by the online brokerage Redfin.
In Austin, the median price per square foot was up 1.3 percent year over year in October, down from the 24 percent annual growth it charted in February — when Redfin considers the housing market to have been at its peak. The median price per square foot in Phoenix was up 6 percent from a year ago, down from nearly 29 percent in February — the biggest drop recorded in the 99 most populous American cities between February and October 2022, according to Redfin.
Las Vegas saw a price growth drop off of 21 percent between February and October, while Boise saw a 20 percent drop.
Phoenix, Austin and Las Vegas are all among the cities that gained the largest amount of new residents during 2021 — many of them tech employees working remotely. Those cities saw housing costs rise to new highs in a relatively short period, with those prices beginning to retreat in the wake of high mortgage rates.
“The forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that saw home prices skyrocket over the last few years,” Redfin Senior Economist Sheharyar Bokhari said in a statement. “Home prices can only rise by double digits for so long before the growth becomes unsustainable. High rates and stumbling tech stocks are making it unsustainable quite quickly, especially in destinations popular with tech workers. Plus, many of the out-of-towners with big budgets who wanted to move into those places already have.”
Austin Redfin agent Maggie Ruiz said the pandemic homebuying boom drove prices up so much that many locals are now unable to afford a home in the city and that she’s noticed migration and investment purchases slow significantly in recent months.
“Even though affordability is a concern, in many ways we are in a buyer’s market,” Ruiz said in a statement. “Some first-time buyers finally have an opportunity to purchase a home without competing with out-of-towners and investors. Because prices and rates are high, a lot of buyers are offering below asking price, negotiating with sellers on a rate buydown, or considering new construction because many builders are offering significant incentives, including rate buydowns, to offload their inventory.”
While newly expensive pandemic boomtowns are slowing, affordable metros on the East Coast and in the Midwest are just starting to take off, with five of the 99 most populous metro areas recording price growth increases, according to the report.
In Albany, New York, the median price per square foot was up 11.2 percent in October, up from a 2.8 percent increase in February. And in Bridgeport, Connecticut, the price per square foot grew 7.5 percent in October, up from 4 percent in February. McAllen, Texas, meanwhile, saw the median price per square foot jump 18.7 percent in October, up from 16.1 percent in February.