The Party’s Over | Think Realty | A Real Estate of Mind
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The Party’s Over

These 12 markets could see substantial home price drops.

It’s clear from home price data for the third quarter that the boom is over, killed by higher mortgage rates—but also because prices can only go so high before buyers balk. Monthly data indicate that the peak was actually reached in May-June, with prices already down a few percent since then.

The boom has left home prices in many markets higher than local incomes can support. Now the big question is whether prices in these markets will crash (over the course of a few years) or whether they’ll just wait for local incomes to catch up. The answer is a bit of both, unless the U.S. economy falls back into a recession, in which case the crash scenario will be widespread.

The rapidity with which higher mortgage rates killed off the boom means that demand was actually pretty thin all along, so prices will probably come down pretty quickly in some markets, providing good opportunities for investors in the next couple of years.

Here are a dozen markets where the drop in prices could be substantial and where economic growth is currently below average, indicating greater vulnerability to recession—and a rapid readjustment of prices.