Fla. Metros Not on List of Fastest Cooling Markets
Rising mortgage rates and still-high prices have pushed pandemic hot spots – notably those with a significant tech sector – to cool faster than other metros.
SEATTLE – Tech-hub housing markets and pandemic migration hotspots are cooling more rapidly than other parts of the U.S. It’s due, in part, to factors influencing real estate across the nation, notably higher mortgage rates and still-high home prices, according to a report from Redfin.
The top 10 slow-down list
- Austin, Texas
- Seattle
- Phoenix
- Tacoma, Washington
- Denver
- Las Vegas
- Stockton, California
- San Jose, California
- Sacramento, California
- Oakland, California
Home buying demand and competition dropped off quickly in tech centers including Seattle, San Jose and Oakland. The typical San Jose home sold for just 0.6% above its asking price in February, compared with 12% above asking price a year earlier – the biggest percentage-point dropoff in the U.S.
Seattle had the third-biggest dropoff, going from 8% above asking price to 1% below during the last year. Pending home sales declined 40% year over year in Seattle and 38% in San Jose.
Florida, however, has not seen a dropoff compared to the rest of the U.S. While sales and price increases have slowed, the market remains consistent.
Why are tech-heavy markets slowing?
- Topsy-turvy tech stocks. Tech stocks fell more than 30% in 2022, though they’ve ticked up a bit since then. It hit the San Francisco Bay Area and Seattle hard because buyers often use stock proceeds for down payments.
- Tech layoffs. Layoffs in the tech industry are widespread. Shelley Rocha, a Redfin manager in the Bay Area, said some buyers have bowed out of their search or canceled contracts because they’ve lost their job or are worried about losing it.
- Low inventory. Plenty of Bay Area and Seattle residents aren’t put off by the prospect of layoffs and a rocky stock market, but the limited number of homes coming on the market is tamping down demand from them, too.
- Pandemic home-price increases are unsustainable. Tech hub home prices rose quickly for many years, especially during the pandemic, pricing out residents who didn’t work for employers like Google, Meta, Amazon, Microsoft or others. However, a pullback in tech after the price increases mean other residents still can’t afford to buy a home locally.
- High mortgage rates. Mortgage rates are sitting around 6.4%, more than double the record low of around 3% common in late 2020 and early 2021. That has driven up monthly housing payments substantially in expensive markets.
- Still-high home prices. Home prices are falling in the Bay Area and Seattle, but they’re still high, largely because of limited inventory. The typical San Jose and Seattle homes sell for $1,250,000 and $710,000, respectively, compared with the $386,000 national median. High mortgage rates are exacerbating the expense.
It’s worth noting that while these markets cooled quickly from February 2022 to February 2023, some agents are now noticing competition on fairly priced homes as mortgage rates decline from their peak and supply remains low.
“I’m seeing bidding wars on homes that are priced fairly and accurately, and the overall market looks strong this week,” said San Jose Redfin agent Laxmi Penupothula. “Overpriced listings are the ones sitting on the market.”
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