”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, which is impressive given the 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%). These cities experienced 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
The housing market has seen a whirlwind of activity in the past year. Rising mortgage rates initially slowed down the market, but house hunters quickly adjusted and pushed prices higher on the limited number of available homes.
In the midst of this chaos, there emerged a modest gap in the average appreciation by price slice.
Starter home prices rose 4.1% in a year. Detroit saw the highest increase at 10.3%, followed by New York City-New Jersey (10.1%), Baltimore (9.7%), and St. Louis (9.6%).
Rising mortgage rates have made homes unaffordable for most homebuyers, leading to increased demand for more affordable homes and driving up prices in the lower-tier market.
However, it’s worth noting that four markets showed starter-price declines, with Austin experiencing a 6.1% decrease.
Luxury home prices rose 3.3%. The top performer was Atlanta, with a 10.3% increase.
High-end housing tends to operate on its own economic rhythm due to the wealth of the buyers. These individuals are often less affected by broader economic trends that impact the finances of typical Americans.
Nevertheless, four markets saw drops in luxury prices, with Austin experiencing a 2.1% decrease.
Mid-tier home prices rose 2.2%. Orange County had the highest gain at 7.6%.
Why did most metros experience low price appreciation? Well, there’s not as much appeal compared to the bargain basement of the real estate market, nor is there any high-end excitement.
Additionally, eight markets saw depreciation in the middle tier, with Austin having the worst results, ranking last in overall pricing and for all three price slices.
Bottom line
The broad but small price gains are certainly surprising considering the 22% increase in financing costs for the same loan amount during this period. It’s puzzling to see the relative weakness in the market’s pricing center.
Perhaps this slice of the market is filled with long-time homeowners who are content with their 3.5% mortgages?
Is this type of housing no longer popular with investors?
Alternatively, the middle tier may be where the must-sell activity is concentrated, involving factors like deaths, divorces, and debt problems.
Or perhaps the murky middle is a warning signal for the housing market.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
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