The red-hot housing market is starting to cool — especially in a few cities across the country. High mortgage rates, inflation, and general economic uncertainty are some of the factors driving price drops. Since homes are sitting on the market longer, this could be an opportunity for some homebuyers.
According to a recent Redfin report, here are the 10 fastest-cooling housing markets in the U.S. If you’re house hunting in any of them, then you might have more negotiating power than buyers did a few months ago.
Redfin says, “Seattle’s housing market is slowing faster than any other housing market in the country.” Washington state’s largest city has long been one of the nation’s most expensive housing markets, so this could be an opportunity for buyers who can weather higher mortgage rates or pay in cash.
The report found 34% fewer homes sold in Seattle during the first two weeks of August than the year before. And prices are also dropping — the typical house sold for 2% less in August than just a month earlier. That means home sellers may be more motivated to negotiate with you on the price as a result.
Las Vegas, NV
While Seattle was a housing hot spot before the pandemic, Las Vegas became a popular choice when remote work made relocating an option. KSNV News 3 says Las Vegas became a so-called “Zoom Town” because people could get more bang for their buck there than in expensive big cities like NYC, San Francisco, and Seattle.
Unfortunately, demand sent home prices way up. For instance, Redfin says this August, the typical home in Las Vegas cost about 35% more than it did at the start of the pandemic. Despite that fact, things could be turning in a way that helps buyers. Home prices went down 3% from July to August, and 26% fewer homes sold.
San Jose, CA
Located in Silicon Valley, San Jose has been one of the nation’s priciest housing markets for quite a while. “Though cheaper than the nearby city of San Francisco,” Rocket Mortgage says, “San Jose still has a cost of living that is 114.5% higher than the national average.”
However, the San Jose housing market is experiencing a slowdown. In fact, Redfin says San Jose has the third fastest cooling market in the country. That could be good news if you’re looking to put down roots in Silicon Valley. The competition isn’t as fierce as it once was.
San Diego, CA
Coming in fourth is San Diego, California. Like many West Coast cities, it’s historically been an expensive city for homebuyers. Since it’s known for sand and sunshine, it’s easy to understand why people want to live in San Diego.
But when you combine high home prices with high mortgage rates, demand can dampen — and that seems to be what’s happening in San Diego. The Redfin report says inventory is growing and prices are dropping in San Diego.
Sacramento is another expensive California city with a housing market that’s cooling. As a matter of fact, the Redfin report says that Sacramento is tied with Denver, Colorado, for the fifth fastest-cooling market in the country.
Now could be a chance to buy a home in this state capital that became popular with remote workers. For instance, the source says the housing market is experiencing a -17.0 percentage-point change in the price per square foot.
Tied with Sacramento in fifth, Denver’s housing market heated up as remote workers discovered the Mile High City. 5280 Magazine says an influx of out-of-staters competing for houses sparked bidding wars and pushed housing prices to record highs.
However, the market is starting to return to pre-pandemic levels. According to FOX31, the Colorado Association of Realtors says buyers are waiting longer and paying less. As a result, available inventory is getting closer to pre-pandemic 2019 levels.
The Phoenix housing market also took off with the rise of remote work. But according to AZ Big Media, market data from Phoenix REALTORS shows the housing market is normalizing. Inventory has grown to three months’ worth of homes.
That’s up from last fall when the source says, “only one month of supply was the reality.” So, buyers have more options and more breathing room. The Redfin report agrees, finding that Phoenix has the seventh fastest cooling market.
Good news for Bay Area homebuyers: Redfin says the Oakland housing market is simmering down. Real estate agent Joanna Rose tells Business Wire, “People who can afford to buy right now could get something for $100,000 or $200,000 less than a few months ago.”
And according to NBC Bay Area, the California Association of Realtors predicts home prices will continue to fall. In fact, they think home prices “will drop about 9% more in 2023.” So, that means the eighth fastest-cooling real estate market may cool even more next year.
North Port, FL
Coming in ninth is North Port, Florida. Notably, it’s the only city outside of the West to crack into the top 10. Although the damage Hurricane Ian left behind may cause a few more Florida markets to cool significantly.
For instance, Redfin says pending home sales have recently plummeted over 50% in Cape Coral, Naples, and North Port. All three have been popular migration destinations, but that may change given the state of Southwest Florida.
Tacoma, Washington, rounds out the list as the nation’s tenth fastest-cooling housing market. Located about 35 miles away from Seattle, Tacoma is the third largest city in the state. And it was an attractive destination for wealthy out-of-towners who relocated during the pandemic, according to Money.
Since both the Seattle and Tacoma real estate markets are slowing, there’s a cooling trend in the Puget Sound area. So, those looking to buy a house in the region may benefit from having fewer buyers to compete with and lower prices. Of course, high mortgage rates make buying difficult for many.