US home prices have been rising relentlessly over the past three years, but a growing number of markets are facing the risk of a sharp price correction.
A new report from Parcl Labs, a real estate data and analytics company, shows that there are 15 housing markets in the United States that are “at risk” of experiencing a home price correction in the coming fall and winter months.
“While there is no guarantee that these regional markets will experience a significant correction in home prices, they are showing signs of weakening,” the report said. “At a minimum, buyers in these markets have more room to maneuver than they did a few years ago.”
US HOUSING MARKET IS ‘STALLED’ AND COULD REMAIN THAT WAY UNTIL 2026
Here are the 15 markets at highest risk of correction, according to Parcl Labs.
The most remarkable part of the list is that 13 of the 15 “at risk” real estate markets are all located in Florida.
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
Florida’s housing stock has been growing at an “accelerating” pace over the past year. Part of that increase is due to Hurricane Ian, which made landfall on Florida’s Gulf Coast in September 2022 and helped fuel a housing supply crisis that was eventually offset by new listings.
Florida is also grappling with rising home insurance premiums, which have further exacerbated affordability issues. Researchers blame the soaring price of insurance on several topics, including climate disasters, rising reinsurance rates and drastic home repairs, with inflation driving up the cost of building materials. In addition, a growing number of Sunshine State insurance companies are leaving the country or raising their rates.
Finally, a new state law passed after the Surfside Condo collapse in 2021 has put “downward pressure” on many older condominiums along Florida’s coastline. The law requires inspections of all condominiums and co-ops that are three stories or more. If there are any issues with the structure, a structural integrity reserve study must be conducted.
Housing affordability at its lowest level since 2007
“This emerging price weakness, particularly in high-performing markets like Tampa and Miami, could signal the early stages of a market correction in the region,” said Jason Lewris, co-founder of Parcl Labs.
Several factors are driving the national affordability crisis.
Years of underbuilding fueled a housing shortage in the country, a problem that was then exacerbated by rapidly rising mortgage rates and expensive building materials.
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Rising mortgage rates over the past three years have created a “golden handcuffs” effect on the housing market. Sellers who secured a historically low mortgage rate of 3% or less at the start of the pandemic have been reluctant to sell, further limiting supply and leaving few options for eager potential buyers.
Economists predict that mortgage rates will remain high for most of 2024 and will only begin to decline once the Federal Reserve The Fed is starting to cut rates. Even then, rates are unlikely to return to the lows seen during the pandemic.
News Source : www.foxbusiness.com
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