After the most competitive period in recent memory, the housing market is rebalancing. The cooling trend that has taken the market by storm is expected to continue seeing more price declines in more cities according to a Knock Buyer-Seller Market Index report released today.
The index analyzes key housing market metrics to measure whether the country’s 100 largest markets favor buyers or sellers. Last month, the index found that home prices in 98 of 100 were below their peak price from last spring. The markets in Providence, Rhode Island and Salisbury, Maryland were the only markets where home prices have remained at their highest since being set earlier this year.
In 42 of the major housing markets, home prices are expected to fall further than their 2022 highs by this time next year. Of those 42 markets, 15 are in the South, 15 are in the West which is home to some of the most expensive markets in the country. The remaining 12 are in the Midwest and the Northeast.
Of the 25 markets with the largest projected median sale price decline, 15 peaked well above the national high of $410,000. In San Francisco and San Jose California, the median sale price peaked at $1.3 million and $1.6 million in April 2022, respectively.
Through the first nine months of 2022, just over 1.8 million homes have traded hands across the largest 100 markets in the nation. This was less than during the same time frame in each of the past four years. While still low, the supply of homes for sale has grown at a steady pace throughout this year as median days on the market increased to 20 in September. This is up by one full week from a year ago.
The average sale-to-list ratio fell to 99% in September. This measures how close homes are selling for their asking price and it’s the lowest level since February 2021 and also down from 100.3% in May when the prices for homes peaked nationwide.
The co-founder and CEO of Knock, Sean Black, said that based on the findings the shift to a more balanced market is still in its early stages. “We expect that this much-needed reset will persist through much of 2023, and although prices will again begin to rebound they likely won’t return to their peaks for the foreseeable future,” he said.
Black went on to say, “While many drivers of the housing market like demographics and record low unemployment have not changed, the combination of higher rates and home prices have put affordability at the worst levels in 30 years with entry-level monthly payments set to be 34% higher in 2022 versus 2021. The good news is that as prices soften and rates stabilize once the Fed is done with its aggressive rate hike campaign—hopefully, after its meeting in November—buyers will be ready to re-enter the market and sellers will retain the majority of the equity gains they’ve seen in the last two years.”
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