2 October 2023
”Survey says” looks at various rankings and scorecards judging geographic locations while noting these grades are best seen as a mix of artful interpretation and data.
Buzz: The housing market is apparently getting a boost from significant interest in the lowest-priced residences.
Source: My trusty spreadsheet reviewed First American’s home-price indexes for 30 of the nation’s biggest housing markets, which comes with a curious twist. These yardsticks slice markets into thirds based on price points for single-family homes within each metro area: the cheapest (starter homes), the in-between (mid-tier) and the priciest (luxury).
Topline
The overall price changes in these 30 markets averaged a 2.7% gain for the 12 months ended in August, not bad for a turbulent period for house hunting.
The past year’s biggest gains were an eclectic mix – Detroit (up 6.9%), St. Louis (6.6%), Orange County (6.5%), Baltimore (5.8%), Boston (5.7%), and Miami (5.5%).
Meanwhile, overall pricing was down in three markets with Austin (off 5.1%), Phoenix (off 2%), and Las Vegas (down 1.9%). This collection of cities saw rapid appreciation during the pandemic era.
California’s six markets tracked by First American had a coastal theme brewing among the larger gains. After Orange County came San Diego (up 5.3%), and Los Angeles County (4.2%). Smaller gains were found inland in Sacramento (2.7%), Inland Empire (1.2%), and Oakland (0.7%).
Details
It’s been a wild year. Rising mortgage rates first iced the market, but then house hunters adjusted and pushed prices higher on the few homes that were for sale.
In that whirlwind, a modest gap emerged in the average appreciation by price slice.
Starter home prices rose 4.1% in a year. Tops was Detroit (up 10.3%), followed by New York City-New Jersey (10.1%), Baltimore (9.7%) and St. Louis (9.6%).
Soaring mortgage rates have made homes unaffordable for most homebuyers, putting a focus on more affordable homes and helping to bump up pricing in the lower tier of the market.
Note that four markets showed starter-price declines, led by Austin’s 6.1% slip.
Luxury home prices rose 3.3%. No.1 was Atlanta, up 10.3%.
Top-shelf housing often dances to its own economic beat. That’s because folks with lots of money, the types who buy pricier homes, are often not as affected by broader economic trends that whack the wallets of typical Americans.
Still, four markets had luxury-price drops, led by Austin’s 2.1% slip.
Mid-tier home prices rose 2.2%. Orange County’s 7.6% gain was the highest.
Why such low price appreciation for most metros? Well, there’s not as much appeal here compared with real estate’s bargain basement. Nor is there any high-end sizzle.
And eight markets had depreciation in the market’s middle, led by Austin’s 5.9% dip. Yes, once high-flying Austin had the worst results – last in overall pricing and for all three price slices.
Bottom line
The broad but small price gains are certainly surprising considering it costs 22% more to finance the same loan amount in this period. Remember, 30-year fixed mortgage rates jumped to 7.1% from 5.2% in a year.
But the relative weakness in the market’s pricing center is puzzling, at a minimum.
Maybe this slice of the market is filled with long-time homeowners happy to stay put with a 3.5% mortgage to pay off?
Is this the type of housing that’s no longer popular with investors?
Perhaps the middle is where the must-sell activity is concentrated – deaths, divorces, debt problems, etc.
Or a gloomy thought: could the murky middle be the housing market’s warning signal.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]