Here's where home prices are falling the most

Here’s where home prices are falling the most

Homebuyers are finally gaining traction in the housing market, but where they can get the best house price discounts varies from metro to metro.

Some of the most popular pandemic boom cities such as Phoenix and Seattle, as well as ever-popular West Coast cities like San Jose and San Francisco, saw home prices drop more than 10% from to their 2022 highs, according to December data mortgage tech and data provider Black Knight Inc. That topped the national average decline of 5.3%, from their June 2022 highs.

This is a welcome sign for some buyers who are taking advantage of new buying power and seller incentives in today’s market. Yet affordability remains a significant challenge this year, as still high house prices and mortgage rates continue to dampen demand.

“We are finally seeing real price corrections,” John Downs, senior vice president of Vellum Mortgage, told Yahoo Finance. “House prices remain high, but are better now and falling.”

Overvalued markets will experience the biggest declines

After mortgage rates soared to nearly 7% last year, house price growth began to falter across the country. By December 2022, house prices had recorded their sixth consecutive monthly decline – and Black Knight predicts that these declines will likely continue through 2023.

About 14 of the 50 biggest markets are already showing signs of a marked slowdown, the report said, with home prices dropping an average of 6% or more from their 2022 highs on a seasonally adjusted basis. Among the metros assessed, prices fell at a steeper pace in the West.

San Francisco took the lead, with home prices down 13% in December 2022 from their peak, according to data from Black Knight. This is followed by San Jose (down 12.7%), Seattle (down 11.3%) and Phoenix (down 10.5%).

A sign is displayed in front of new condominiums for sale on December 19, 2022 in Los Angeles, California.  (Credit: Mario Tama/Getty Images)

A sign is displayed in front of new condominiums for sale on December 19, 2022 in Los Angeles, California. (Credit: Mario Tama/Getty Images)

Yet home prices remain high for many buyers. For example, the median listing price for a home in San Francisco was $1.3 million at year-end, according to real estate, still up 3.7% year-on-year. However, the average home sold for $1.25 million, 3.8% below the median listing price.

“Buyers, especially on the West Coast, know Seattle has been in the seller’s market for a decade, but they may have a short window to buy where they can use incentives to buy and get ahead of the competition” Jeff Reynolds, Broker at Compass and founder of, told Yahoo Finance. “People would rather buy than wait until there is multiple bid competition again.”

Some markets will experience a softer landing

Some markets, however, will see a more modest decline in house prices.

According to Black Knight, only four of the top 50 markets saw no price drops, including Kansas City, Indianapolis, Virginia Beach and Louisville, while 20 markets saw price drops of up to 2%. Twelve metros saw declines of 3% and 5% from their highs.

A separate report from Goldman Sachs found that more affordable areas — where monthly payment for a new mortgage costs around a quarter of monthly income, such as in Philadelphia or Chicago — are likely to see a gentler decline in mortgage prices. real estate compared to the most expensive. markets. By comparison, in the West, mortgage payments make up three-quarters of monthly income, Goldman Sachs found.

“If you’re a first-time buyer in a market like Washington, DC, you know the last three years have been really crazy,” Downs said. “But the prices are finally coming down.”

No “catastrophic drop” in property prices


A “Reduced” sign sits in the front yard of a house for sale in northeast Washington, DC. (Credit: Drew Angerer/Getty Images)

According to Fannie Mae senior vice president and chief economist Doug Duncan, house prices will go down 6.7% over the next two years, but there will not be a “catastrophic decline” like that seen during the Great Recession.

The main concern of many economists and housing experts remains affordability.

The national payout-to-income ratio is 34.8%, according to Black Knight estimates. Although this figure is down from 38.4% in October 2022, it is still above the peak levels seen in 2006 before the Great Recession.

That means it now takes $600, or 41%, more to make the monthly payment on a 30-year mortgage on an average-priced home — after putting 20% ​​less — than it did a year ago. a year.

“The key question is what happens to household incomes now. If they strengthen and employment remains reasonable, there will eventually be an adjustment in the relative relationship between incomes, mortgage rates and house prices that will allow consumers to get back into the game,” Duncan told Yahoo. Finance. “That’s our theme this year – it’s all about affordability.”

Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.

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