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U.S. home prices are facing a steep drop, with the West Coast facing the fastest declines


The US housing market has fallen steeply from the highs seen in the immediate aftermath of the Covid-19 pandemic.

According to a study by the American Enterprise Institute published by Fortune Magazine, the West Coast is experiencing a rapid decline in housing prices in cities like San Francisco and Portland, Oregon.

The study was conducted by Ed Pinto, director of the American Enterprise Institute’s Housing Center. Pinto told Fortune he expects the “damage” to spread to the northeast, with the low and mid markets hit the hardest.

Northern California leads the way, with San Jose down 10.8% since September, followed by San Francisco at 8.5%, then Seattle at 8.2%, Denver at 5.8%, San Diego 5.2%, Portland 5.1%, Las Vegas 4.8% and Phoenix 4.4%.

The west coast is seeing a rapid decline in housing prices in cities such as San Francisco and Portland, Oregon, where crime is rampant.

The Fortune report says other cities across the country have seen worryingly small declines. Those of Dallas, Orlando, Atlanta and Raleigh.

However, during the post-Covid boom, these cities remained more affordable compared to their Western counterparts, so the drop would still be less severe.

Pinto told Fortune, “The expensive parts of the market are the first to decline because they suffer the most when the Fed takes the punch away and rates rise.”

He continued, “That’s because high-income buyers are borrowing in private markets, and when rates go up, they have a harder time qualifying for home loans than low- and middle-income borrowers who are getting mortgages. Fannie Mae, Freddie Mac and FHA loans.”

Pinto went on to say that the housing market is likely to be affected by the impending economic downturn. He said rising unemployment will lead to more foreclosures and distressed sales.

The economic slowdown is expected to last eight months

The economic slowdown is expected to last eight months

Earlier this month, a Bloomberg survey of economists’ views found that a recession is 100% certain within the next 12 months.

A separate Wall Street Journal study published over the weekend found that 63% of economists believe a recession coupled with job losses is inevitable in 2023.

However, that 63% is the biggest recession chance WSJ economists have given since July 2020 in the midst of a recession.

Those involved in the study found that the recession would lead to a reduction in federal interest rates at some point over the next two years.

Referring to this reduction, Daniil Manaenkov of the University of Michigan told the Journal, “The soft landing” will likely remain a mythical outcome that will never happen.”

Pinto also pointed to gas prices across the country. He said: “Rising gasoline prices are often the canary in the coal mine for lower house prices.”

He said people will look to live closer to work to save on gas costs. ‘

U.S. home prices are facing a steep drop, with the West Coast facing the fastest declines

U.S. home prices are facing a steep drop, with the West Coast facing the fastest declines

It is Pinto’s opinion that homeowners in New England and the Tri-State area will suffer the most from rising gasoline prices.

“It is already reducing demand. Oil prices are extremely high in New England. Add higher gas prices on top of regular inflation. Additionally, these are states that are found in the Rust and Frost Belts. If unemployment increases significantly, their low-cost markets will be particularly affected,” Pinto said.

While states like Florida and the Carolinas, which have seen huge migration during Covid-19, will continue to thrive on people moving from northern states to warmer climes.

In September, home sales fell to their lowest level on record, according to new data, as mortgage rates hit a 20-year high and inflation bites into existing savings.

US home sales fell in September as mortgage rates (in yellow) rise and house prices (in red) remain stubbornly high

US home sales fell in September as mortgage rates (in yellow) rise and house prices (in red) remain stubbornly high

U.S. home prices are facing a steep drop, with the West Coast facing the fastest declines

New data from Redfin, which boasts of running the country’s leading real estate brokerage site, released on Wednesday showed the scale of the downturn – which had been widely expected.

The number of homes sold in September was down 22.8% year-on-year, with 499,941 deals completed compared to 647,413 in September last year.

The national average 30-year fixed-rate mortgage rate was 6.1% – down from 2.9% this time last year – and has only risen since.

Mortgage rates have more than doubled since last year, hitting a 20-year high last week, according to data released Wednesday by the Mortgage Bankers Association.

The 30-year fixed rate climbed to 6.94% in the second week of October from 6.81% a week earlier.

Redfin also reported that sellers are rethinking, amid the market seizure: New listings fell 22% last month, marking another grim record for the biggest drop in history, excluding months pandemics of April and May 2020.

“The U.S. housing market is stalled again, but the driving forces are completely different from those that triggered the shutdown at the start of the pandemic,” said Chen Zhao, head of economic research at Redfin.

“This time demand is collapsing due to soaring mortgage rates, but prices are being supported by inflation and a drop in the number of people putting their homes up for sale.

“Many Americans are staying put because they’ve already moved and gotten a rock-bottom mortgage rate during the pandemic, so they have little incentive to move today.”

The median U.S. home price rose 8% year-over-year in September to $403,797.

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