You’ll hear very different stories about how the real estate market is doing, depending on where you are in the country.
The market in the United States is soaring and crashing simultaneously, creating an interesting juxtaposition.
Black Knight’s data shows that West Coast home prices are seriously declining, with some describing it as a crash, while East Coast prices are soaring. The split in the housing market seems to primarily depend on whether you’re east or west of the Rockies.
From January 2022 to January 2023, there was a 7.5% decline in home prices in Seattle, with San Francisco seeing an average decline of 10.3%. At the same time as this was happening, home prices were up 12% in Miami, and they rose 9.3% in Orlando.
Aside from Austin, 37 of the biggest metros located to the east of Colorado experienced year-over-year increases in home prices in January. All 12 major markets west of Texas experienced falling home prices during the same time.
There’s never been a split like this in the U.S. as far as the housing market to this point.
During the housing crisis happening in 2007 and 2008, home prices were down in 134 of 153 metro areas. Even when small areas were somewhat stronger during this time, the prices stayed flat rather than going up.
The vice president of Black Knight told The Wall Street Journal that what they were seeing was unprecedented.
According to analysts, the big splits in the housing market are driven by multiple factors, including the pandemic, which led to a huge demand for housing while supplies were limited. The housing supply is still low, and mortgage rates are higher than they’ve been in a decade. Things are incredibly expensive for buyers, so they’re seemingly going to markets that have a good supply of affordable homes, often in the eastern part of the country.
Places like Los Angeles and San Francisco already had extremely high home prices, so there’s been more room for them to fall. Plus, tech companies have been laying off employees, and most of these businesses are in cities on the west coast, taking buyers out of those markets and leading to more homes for sale.
Between 2012 and 2020, home prices in San Francisco went up 112%, but the national gain in prices during that same time was only 58%.
Analysts are unsure whether the struggles seen in the West Coast markets will spread to the East Coast, especially if the supply of houses remains low.
There are also a number of millennial and Generation Z buyers, which could limit further declines in prices, but a lot of what happens in all markets will depend on mortgage rates.
Mortgage rates were recently off their highs, giving potential buyers a bit of relief.
Another area of divergence within the broader U.S. real estate market relates to high-end consumers. These higher-end buyers are more active right now, largely because many can buy homes with cash, so they don’t base decisions on what happens with the mortgage rates.
Of course, it’s not all good news, even in east coast markets. Miami, for example, which saw a surge in buyers from the northeast during the earliest days of the pandemic, has now seen sales drop almost 69%. In Long Island, sales are down almost 63%.
It’s very much a mixed picture in the U.S. housing market, the scale of which hasn’t been seen before. No one’s sure if things will stay strong in the eastern part of the country or whether its decline is just happening at a lower and less dramatic pace than western markets.
