Home price appreciation is leveling out on a national level, but zooming in on price points and regions reveals a more complex picture, according to new data from the AEI Housing Center.
The center looked at how home price appreciation is changing, first by price tier and then by specific metros and geography. While June home price appreciation dropped to nearly zero month-over-month nationally, the story is completely different when analyzing these two metrics.
In the first, the Center divided home sales into four price tiers based on their access to leverage. Doing so revealed that appreciation is slowing across all tiers, especially when it comes to the highest level.
High-price tier homes were the first to show a negative change month-over-month, down 0.6%.
High-price tier homes comprise about 6% of the market and generally consist of loans above GSE limits. They are traditionally more sensitive to interest rate changes. When the 30-year fixed rate hit 5%, high-tier home prices plummeted by 1.5%, the highest drop across the four categories.
The medium-high price tier tied with the month prior, while overall price changes were positive at 0.2%.
Breaking down price appreciation by metro and geography showed that the West took the largest price decline hit.
Twenty-one of the largest U.S. metros saw prices drop in June, and of those, 11 were in the west.
San Francisco, San Jose, and Seattle saw particularly sharp declines.
Only two Western metros saw continued home price growth – Boise (+1.8%) and Las Vegas (+0.2%) – likely because prices have yet to peak there.
The Center noted that the rest of the country is a mixed bag compared to the West. Three-quarters of the 52 largest U.S. metros saw positive price growth in June, with New York, Columbus, and Kansas City topping the list. Notably, those three metros have seen relatively modest price gains, unlike the explosion that occurred in the West.
Opposing the West’s rise and fall is Florida, which continues to see robust price growth. Home prices have skyrocketed by 67% in the last two years.
While the “buying frenzy” has ended, the Center says prices are still going up.
Only Cape Coral reported a decline in price growth, down 1% and the first since the pandemic.
Taking these two metrics together, the Center says areas that saw huge growth during the pandemic will keep slowing, while those metros with more moderate growth may see a slower rate of decline.
Moody’s Analytics has calculated a similar trajectory, saying that of the 414 largest housing markets, 210 will see home prices decline over the coming two years while 204 will see more increases.
Lawrence Yun, Chief Economist at the National Association of Realtors, noted that price growth in certain hotspots is dependent on migration from other areas, which could continue.
“What I can say is that those markets that boomed [during the pandemic] were driven by strong local job creations and from new residents moving into those regions, including as retirees,” he told Forbes.
“So, for places like Phoenix, Tampa, and Boise, you may or may not see any meaningful price decline. They could also be primed for even more price gains.”