House prices in regions that flourished during the pandemic are set to nosedive with four major metropolitan areas worst-affected, a new report claims.
Among the ten housing markets experiencing the quickest cooldown, six are located in Florida, with an additional two in Texas.
In western Florida, housing markets are experiencing the most extreme drop.
The decrease is attributed to increasing natural disasters, surging new constructions, sky-high insurance costs and the decreasing pandemic-era home buying boom, according to data from Redfin.
‘Inventory is back up to pre-pandemic levels along the west coast of Florida as natural disasters continue to shape the region’s housing market by leading to more supply and less demand,’ said Elijah de la Campa, Redfin Senior Economist.
‘Construction is booming in the wake of recent climate disasters, and there’s less demand to buy new homes as the region braces for another intense hurricane season,’ he said.
Americans flocked to regions like Florida and Texas during the pandemic when a widespread shift to working from home unchained employees from big cities like New York and San Francisco.
At the time, properties were priced so low buyers raced to snap up large homes with outdoor space to spend lockdown.
But across the board, America’s property market has been rocked by the Federal Reserve’s aggressive interest rate hikes which have in turn sent mortgage payments soaring. The average rate on a 30-year fixed-rate mortgage is now 6.86 percent compared to around 3 percent in 2020, according to figures from Freddie Mac.
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It has created a so-called ‘lock-in effect’ as homeowners are reluctant to move as it would mean giving up their cheap deals.
Now experts speculate that the regions which saw the biggest price boost face the sharpest fall.
Campa said that while the news may be disappointing for sellers, a bigger pool of listings to choose from is ‘good news’ for the region’s homebuyers overall.
‘More supply is the best way to bring down prices and combat the housing affordability crisis buyers are facing today—and that’s exactly what’s happening in parts of Florida,’ Campa added.
North Port has the fastest-cooling housing market, followed by Tampa and Cape Coral.
In North Port, home listings have increased by 68 percent compared to last year, with prices per square foot down by 1.2 percent.
Other Florida cities like Orlando, Jacksonville, and Lakeland are also seeing cooling markets, along with Denver, Houston, Minneapolis, and Dallas, according to the report.
Similar trends are seen in Cape Coral, where inventory is up 64 percent and prices per square foot have decreased by 2.9 percent.
‘These pandemic boomtowns, they just got way too expensive over the last two or three years,’ Nicholas Gerli, chief executive of Reventure Consulting and Reventure App, told CNBC.
‘They’re 20 percent, 30 percent, maybe even 40 percent, overvalued in some cases; and now that we’re seeing the inventory levels spike and the number of price cuts on the market spike, that’s the signal for you all out there that the market is shifting down, particularly in Texas and Florida.’
‘Those are the two markets right now where we’re seeing the biggest downturn.’
‘I was actually one of those people who moved to Austin,’ Gerli told Fortune.
‘I mean Austin is a market that’s legitimately crashing, that’s not an exaggeration. Prices are down almost 20 percent there, and they’re going to continue to go down due to those skyrocketing inventory levels.’
‘I saw it in so many different cities in this housing cycle: Austin, Phoenix, Boise, Tampa, Jacksonville, in a lot of these markets, people said it would never go down,’ he said. ‘As we speak, it’s starting to go down, and the telltale sign is those inventory figures.’
Gerli added, ‘We have lots of investors selling, we have a huge homebuilder permitting pipeline that’s still getting delivered over the next year. And in addition, particularly in Florida, we’re seeing a lot of regular homeowners being forced to sell their homes because of skyrocketing insurance and HOA fees.’