When home prices began to drop in the summer amid higher mortgage rates and waning affordability, it was unclear how far — or for how long — they might fall.
By June, prices had ballooned more than 40 percent nationwide in less than two years, causing some industry observers to speculate that much of those gains could be undone.
But that’s not what’s happened since, at least according to the latest market-level home price data from the National Association of Realtors.
More than 2 in 3 major markets saw home prices rise in the first three months of the year, a quick stabilization following roughly a half-year of moderate decline, according to Q1 metro home price data released Tuesday by the National Association of Realtors. Still, they were down 0.2 percent since the same time last year.
Home prices typically rise heading into the spring as the housing market begins its fast-paced seasonal buildup toward peak activity in the summer months.
And even in once-hot pandemic migration destinations where prices have fallen more than 10 percent year over year — such as Austin and Boise— the downturn may already be running its course, NAR Chief Economist Lawrence Yun said.
“Due to the intense housing inventory shortage, multiple offers are returning, especially on affordable homes,” Yun said in a news release accompanying the report. “Price declines could be short-lived.”
In addition to these pandemic hotspots, the places that experienced the largest price depreciation were in California and other pricy enclaves that were more expensive even before the pandemic began. Among them were San Francisco, San Jose and Reno, Nevada.
“Generally speaking, home prices are lower in expensive markets and higher in affordable markets, implying greater mortgage rate sensitivity for high-priced homes,” Yun said in the release.
On the other side of the housing market, the number of metros that can claim double-digit price growth year over year is quickly drying up.
The last vestiges of places with double-digit growth made up 7 percent of all major markets in the U.S. in the first quarter of the year, down from 18 percent of markets in the final three months of 2022.
Among the cities still holding on to big annual price gains are Milwaukee, Dayton and Oklahoma City, according to the report. The Kingsport and Bristol area of Tennessee led the nation with nearly 19 percent year-over-year home-price gains in the first quarter of the year.
Nationwide, the uptick in home prices to open the year came despite an affordability environment that remained strained for many families. Mortgage rates came down a bit from their 7 percent levels in that time, coinciding with a moderate decline in the typical mortgage payment from $1,967 in the fourth quarter of 2022 down to $1,859 in the first quarter of 2023.
That’s more than a 5 percent drop from the previous. But year over year, the typical mortgage payment was up 33 percent, indicating the relief was small for most buyers.