When Will Home Prices Come Down?
Did you know that in May of this year, there were more 8 figure homes sold than in any home price surge? And the average price was over $2 million. I'm a bit of a real estate geek, but even I think that's nuts. In places like Los Angeles and Seattle (and many other markets), home prices are now double what they were before the housing crash in 2007. What's causing these crazy increases and when can we expect them to slow down or stop?
The housing market is at a crossroads. Will it crash as it did during the 2008 recession, or will it just fizzle out? And don't forget, the war in Ukraine could overtake all forecasts, including this one.
Part of the answer lies in how high prices have risen, and part lies in how strongly new job growth will support demand for housing. Even though prices have boomed in most markets, few of them can sustain continued demand.
Here are 10 markets where home prices are sharply higher in the past year. They all are overpriced compared to local income, some more than others. In five of these markets, the number of jobs grew rapidly in the past six months; in the other five, job growth was much weaker.
The 10 markets with the sharpest price increases are:
- San Francisco up 22 percent
- San Diego up 18 percent
- Orange County up 17 percent
- Los Angeles up 13 percent
- Oakland up 11 percent
- San Jose up 10 percent
- New York City up 10 percent
- Portland (Oregon) up 9.7 percent
- Miami/Fort Lauderdale up 8.2 percent
- Seattle 8.1 percent
Takeaway: A crash is coming in many places, but not all.
The markets with weak job growth are very likely to see a decline in home values after next year. The boom will bust. Markets with strong growth are more likely to see home values hold up. The boom will just fizzle out.
Eventually, all markets get back to a balance of jobs, income, and home prices, but we'll see some big differences in how long that takes