Higher mortgage rates and a stumbling stock market are causing northern California housing markets to chill faster than anywhere else in the country.

Housing Market Cooldown Dominant in Northern California

Five of the ten US housing markets that have seen home prices back down the fastest are in northern California…San Jose, Oakland, San Francisco, Sacramento and Stockton.

Northern California is particularly vulnerable to cooling home prices for two reasons.  First, fast rising mortgage rates that reached nearly 6% in the spring had an oversize impact on the country’s priciest areas and, by the way, San Jose, Oakland and San Francisco are the most expensive metros in the US.  Typical homes in these three metros sell for over $1M and many sell for over $1.5M.  The typical monthly mortgage payment on a million-dollar home is approximately $5,750 at a 6% interest rate.

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Secondly, northern California is one of the world’s major tech hubs.  Many of the people who work within the tech sector are compensated with equity.  At a time when the stock market transitioned from being a proud bull to an angry bear, many tech workers in the Bay Area who are prospective homebuyers simply have less money.  They’ve seen their employers’ stock prices cascade in the last several months and that cascade has cost them from the low- to mid-six figure amounts.

10 Fastest Cooling Housing Markets in US – June 2022

According to a Redfin analysis of market data in the country’s 100 most populous metro areas from February 2022 to May 2022, housing markets in the Western US reacted the fastest to mortgage rates that have nearly doubled since the beginning of this year.  Redfin based its analysis on changes within this February-May time frame in year-over-year price growth, price drops, supply, pending sales, sale-to-list ratio and speed of home sales.

Here’s Redfin’s list of the ten most cooling markets in the US as of June 2022:

         Market                          Median Sale Price 5/22

  1. San Jose CA                             $1,560,000
  2. Sacramento CA                         $610,000
  3. Oakland CA                              $1,070,000
  4. Seattle WA                                $850,000
  5. Stockton CA                              $576,000
  6. Boise ID                                    $550,000
  7. Denver CA                                 $612,000
  8. San Diego CA                            $875,000
  9. Tacoma WA                               $575,000
  10. San Francisco CA                       $1,620,000

Ten Slowest-Cooling US Housing Markets

     Market                                 Median Sale Price 5/22

  1. Albany NY                                  $289,000
  2. El Paso TX                                  $238,000
  3. Bridgeport CT                             $570,000
  4. Lake County IL                            $324,400
  5. Rochester NY                              $212,100
  6. New Brunswick NJ                       $465,000
  7. Cincinnati OH                              $265,000
  8. Akron OH                                    $200,000
  9. New Haven CT                            $310,000
  10. Virginia Beach VA                        $325,000

Pandemic Boomtowns Also Cooling

Many metros around the country saw an influx of out-of-towners and scores of remote workers who, at the onset of the pandemic, were looking for affordability, larger homes and slower-paced lifestyles.  Now, those popular migration destinations such as Cape Coral FL, Las Vegas, Phoenix, Austin TX and North Port FL are among the nation’s top 20 housing markets cooling the fastest.

Agents, pay attention to both the top 10 and the top 20 housing markets now cooling the fastest.  More than ever, affordability is the name of the game and your market may be next to pay the price of becoming not-so-affordable anymore.

Also remember that “cooling” does NOT mean buyers will see price drops.  Although price growth is slowing in some markets, industry experts are NOT anticipating significant price drops in most markets.

Thanks to Redfin.

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