Since the peak of the housing boom back in June and July 2022, average home prices are down 5%. In the Mountain States and Pacific coast, they are down more than 7%. In Florida, on the other hand, they’ve dropped just 2%.
The deflation of the home price boom will be steady but uneven across the country during the next few years. Our ability to forecast what will happen is, of course, constrained by our inability to forecast the boom in the first place—everything now is abnormal. Still, it’s fairly certain that the huge price increases of the past two years can’t be sustained; prices are far above what local incomes can support.
Our best guess is local markets with good population growth (like those in Texas and Florida) will have better support for prices than those with population losses. And the internal dynamics of price movements also give us clues about timing. Prices in Boise were up just 1% in the past year; in Tampa they were up 20%.
The accompanying chart shows a dozen markets from around the country. It indicates how much home prices increased during the past two years and what we expect will happen with prices during the next 12 months. Markets like Tampa and Phoenix don’t get to sidestep the busting of the boom—it will just take longer in those areas. Smaller markets like Boise could easily have a steeper crash.
This is a time for investors to focus sharply on the economics and home price dynamics of local markets; broad generalizations won’t do. During the next few years, home prices will fall everywhere, so investors will have opportunities everywhere. Taking advantage of those opportunities will require close attention.
Ingo Winzer is president of Local Market Monitor. The company’s Investors Metro Analysis shows the opportunity and risk in 200 local real estate markets at www.LocalMarketMonitor.com, including strategic analysis of all local Zip Codes.
Winzer has analyzed real estate markets for more than 30 years, and his views on real estate markets are often quoted in the national press. Previously, Winzer was a founder and executive vice president of First Research, an industry research company acquired by Dun and Bradstreet in 2007.
Winzer is a graduate of the Massachusetts Institute of Technology and holds a master’s degree in finance from Boston University.
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