Monday, 28 October 2024
by BD Banks
Image source: Getty Images
If you’ve been watching the housing market, you’ve likely noticed a shift. Home prices, which seemed to be on a never-ending upward trajectory, are now beginning to drop in certain states. According to data from Zillow, U.S. home prices fell by 0.03% month over month between July and August 2024 — a modest decline, but significant given that prices usually increase during this time of year. From 2000 to now, July to August has typically seen a 0.4% increase.
With affordability issues keeping buyers on the sidelines, inventory is building up, especially in some Southern and Southwestern states. As a result, homes are sitting on the market longer, and sellers are adjusting their prices to attract home buyers. As mortgage rates continue to fall, buyers in some places could find a deal.
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So, where exactly are prices falling? Let’s dive into the five states where you might find better deals.
Texas, long a hotspot for buyers seeking more space and affordable living, is seeing home prices start to cool, particularly in markets like Austin and Dallas. During the pandemic, Texas saw a massive influx of new residents, which drove prices up sharply. But as of mid-2024, inventory has surpassed pre-pandemic levels, and the market is now experiencing some corrections.
In fact, Austin’s housing market, which was one of the fastest-growing during the pandemic, has seen home prices decline over the last few months. Active inventory is rising, buyers have more options, so prices are slowly decreasing to balance demand. In July 2024, Texas home prices experienced a 0.2% month-over-month decline, a shift from the steady growth observed over the last few years.
Florida’s housing market is also softening, particularly in the condo segment. After the Surfside condo collapse in 2021, new regulations were implemented, slowing condo sales. While Florida’s overall real estate market remained strong for a while, areas like Tampa and Orlando now feel the impact of rising inventory and slower demand.
Florida’s condo market, in particular, has been hit by a wave of caution, leading to price corrections in these areas. As a result, home prices, especially condos, fell after reaching unsustainable levels during the pandemic housing boom. Home prices in Florida were down 0.48% compared to last year.
Arizona, especially cities like Phoenix, has been a magnet for people seeking warm weather and relatively affordable housing. But like other Sun Belt states, Arizona’s rapid price growth during the pandemic is now slowing down. Inventory levels are increasing, and builders are offering incentives like mortgage rate buydowns, which has led to a cooling effect in the resale market.
As a result, home prices in Arizona are seeing month-over-month declines for the first time in years. In August 2024, home prices in Phoenix, AZ dropped by 4.8% year over year following several years of rapid growth. Buyers have more options now, and sellers are adjusting to the new reality of a slower-moving market.
Home prices in Louisiana are starting to correct after the sharp increases seen during the pandemic. In cities like Baton Rouge and New Orleans, the number of homes for sale has risen, giving buyers more leverage and leading to price reductions.
While the overall market in Louisiana remains stable, the increased inventory is pushing prices down slightly as sellers look to attract cautious buyers who are holding out for better deals. New Orleans-Metairie saw a 0.6% month-over-month decline, a 13.7% drop since its 2022 peak, and a 4.6% decrease year over year.
Colorado’s housing market is cooling off, especially in Denver, where home prices dropped 1.8% year over year in August 2024. After a post-pandemic boom drove prices up fast, the market is now stabilizing.
Fewer homes are selling too — 7,161 this past August, compared to 7,272 last year. Both buyers and sellers are paying closer attention to the details, as every deal now counts more in a more measured market.
During the pandemic, many of these states saw extraordinary demand from buyers looking to relocate, leading to a surge in home prices. But now that migration has slowed and mortgage rates have risen significantly, fewer people can afford homes at these inflated prices. At the same time, inventory is increasing as more homes are listed for sale, further dampening price growth.
Additionally, builders in these states ramp up supply to meet demand, creating a cooling effect in the resale market. Meanwhile, regions like the Northeast and Midwest, with less new construction, are seeing fewer price drops since existing homes remain in high demand.
If you’ve been waiting for the housing market to cool down before making a purchase, now might be your chance — especially if you’re looking in one of the states mentioned above. Prices are falling, and buyers have more room to negotiate, particularly as homes sit on the market longer.
But don’t wait too long! While prices are dropping in some areas, they aren’t crashing, and demand could pick up again once affordability improves or interest rates come down. It’s all about timing, so be ready to act when you find the right deal.
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