Mortgage rates went to all-time lows during the pandemic, with home prices reaching new highs, but now, in the wake of that boom, the U.S. housing market is slowing. The demand and price gains are cooling significantly, and while there is likely to be a correction, economists and analysts believe it will be modest and not on par with what we saw during the Great Recession.

The National Association of Home Builders' chief economist said that experts think it will be a moderate downturn.

Since the pandemic started in March 2020, house prices are up 39%, but bidding wars aren’t happening anymore, and inventories are growing.  

One difference between now and the Great Recession that leaves analysts with the belief that we won’t see what we did then is that homeowners’ personal balance sheets are stronger. The typical homeowner with a mortgage currently has excellent credit, fixed-rate mortgages locked in at low  rates, and a lot of equity.

Builders have also been cautious, dealing with their memories of the Great Recession, so they’ve tried to keep their pace of construction in check.

There’s not necessarily enough inventory to see something as catastrophic as 2008. However, some markets are likely to see more significant declines than others, including the following:

Austin, Texas

Austin has been in the midst of a massive boom in terms of housing prices, people relocating to the city from other parts of the country, and development in general.

However, in a recent survey from Consumer Affairs’ 33% of respondents believe Austin will be the first market in America to crash.

The median home price listings in Austin during the summer was $650,000, coming out to around $364 per square foot. That was up more than 18% year-over-year, and homes have been selling at double that amount. While that may be the median home listing price, homes have been selling at almost double the amount. The median home sale price is $1.3 million.

If Austin were to experience a 15% decline in home prices, the median listing price would go down to around $552,500.

Atlanta, Georgia

In the same survey cited above, 26% of respondents said the prices there would likely be falling shortly, and the city could see a housing crash.

The median listing price in Atlanta as of July this year was $435,000, an increase of 8.7% year-over-year. If there were a 15% correction in the Atlanta market, the median listing price would go down by around $65,250.

Bakersfield, California

Bakersfield had a July median listing home price of $380,000, with the median sales price being $350,000. If there were a 15% decline in home prices in Bakersfield, the median listing price would go to $323,000.

Los Angeles

Twenty-three percent of those polled said they believe Los Angeles will experience a significant housing crash.

As of July, the Los Angeles median listing price for a home was $1 million. The median sales price was $948,000.

Some analysts say they don’t necessarily expect a nationwide correction at all, but some regional markets could face declines of 20%. These markets cited by analysts include Dallas, Austin, Phoenix, and Las Vegas.

The correction will likely be worse in some of the places that were hot spots during the pandemic. These areas got surges in new residents, making affordability a major concern. As a result of pandemic changes in lifestyle, some markets are especially vulnerable. A lot of these are concentrated in the western region of the country.  

On Zillow, around 9% of active listings have cut their prices, mainly in the areas that saw soaring during the pandemic. The less affordable western cities like San Diego, Los Angeles, and Seattle may be more vulnerable to corrections, while metros in the south that are more affordable might be able to avoid one.

The chief credit strategist for Goldman believes that nationally, home prices will avoid a correction in the coming year, but 39% of metro areas will have prices decline.

Other areas that may not face a crash are ones with low levels of new construction. In the northeast, for example, there are low incoming supply levels, and most sales come from existing homes, so homeowners will probably stay put for longer instead of selling for lower prices.