FEMA gave some Fla. homeowners extra time to renew flood insurance due to the storms, and reps are going door-to-door to contact 11K owners who can still do so.
For the past several years, venture capital–backed investment behemoths and mom and pop newbies alike have poured money into real estate. With mortgage interest rates at historically low levels and stimulus cash sloshing through the economy, real estate investment went from vigorous to full-on feverish. And along the way, investors—many of whom came to the party with all-cash offers—fully changed the face of many markets, sometimes locking out first-time homebuyers.
However, many of those investors, especially smaller ones, have recently slammed the brakes on their purchases as the housing market has shifted.
The market conditions that made the foray into real estate investment such a sexy proposition have in large part begun to dry up as mortgage rates have soared—and the large hikes in rental prices are beginning to slow.
In some parts of the country where investors competed directly with first-time and other buyers, often winning the bidding wars, investors have been beating a hasty retreat. So Realtor.com® dug into the data to figure out where investor home purchases have fallen the most. Buyers might have a stronger shot at purchasing homes where they hope to live in these markets if they’re not competing with as many cash-flush competitors.
Note: We looked only at sales of investment properties that were purchased using mortgages, which, according to Daren Blomquist, is where you’ll find more of the beginner investors. These homes are generally flipped or rented out.
“Established investors who have more capital reserves would be more likely to buy with cash,” says Blomquist, the vice president of market economics at Auction.com, a website that specializes in foreclosure listings.
Rising home values of the past several years pushed many of these investor buyers out of the premier, coastal real estate markets and into smaller cities, says Matthew Gardner, the chief economist for Seattle-based Windermere Real Estate. They include places like Boise, ID, where home prices were traditionally more affordable than urban hubs such as New York City, Boston, Chicago, and San Francisco.
However, those places where investors flooded into are now the places where investors are pulling back the most.
“The geography has started to shift,” says Gardner. “Investors are going to be looking at markets that are cheaper.”
Nationally, the portion of investors using a mortgage to buy a rental property or a home to flip is at a three-year low as of October, according to seasonally adjusted data from Optimal Blue, a mortgage data clearinghouse. Fewer than 1 in 17 mortgages is being used for an investment purchase, down from around 1 in 12 a little less than a year ago.
Many smaller, mom and pop investors who don’t have the mountains of cash of the institutional investors—aka the big banks, hedge funds, and other large financial companies—usually buy homes with mortgages. Some of these homes are then used as rentals, which can be highly profitable in places where home costs are low but rents are high and rising. Or they purchase properties that need work, hold onto them for only a few months (while paying the mortgage and the costs of required repairs, updates, or upgrades), then sell them for a hefty profit.
But it’s harder to make the numbers work in today’s cost-squeezed market.
For example, an investor buyer who was looking at borrowing $400,000 to buy a rental property last year with a 3.5% mortgage rate on a 30-year fixed-rate loan, would need to earn about $1,800 a month to cover the investment.
If that same hypothetical investor is looking at borrowing $400,000 with today’s roughly 7% mortgage rate, it will take around $2,700 to cover the monthly payment. In many places, renters simply can’t afford that $900 rent hike, so the investment no longer makes sense.
“Investors will jump back in when things change,” Gardner says, meaning some combination of lower borrowing costs, significant price reductions, or the capacity of renters to cover much higher leases.
So where have investor buyers pulled back the most? To figure it out, we looked at Optimal Blue mortgage data for the 100 largest metropolitan areas. Then we identified the places where investor purchases, as a share of all mortgage-financed purchases, have dropped the most, year over year, since their post-pandemic peak.
To add context, cash-purchase data from ATTOM Data Solutions, another real estate data provider, was included for metro areas where it was available. And we included only the single metro area with the largest drop for any state, to ensure geographical diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
1. Seattle, WA
Median home list price: $750,000*
Investors have backed off of their real estate purchases in the Emerald City as their purchases just aren’t penciling out the way they did earlier. Roughly 1 in 30 mortgages in the metro area is now for investment properties, compared to 1 in 20 about a year ago.
“In markets like Seattle, which have gotten so expensive, where buyers are paying $800,000 to $900,000, the rent required to cover that is going to be $6,000 or $7,000 per month,” says Gardner, of Windermere Real Estate.
For a potential landlord, the prospect of finding a renter who can pay that kind of money every month is increasingly slim. Nonetheless, cash purchases in Seattle have held steady for about the past year, at around 20% of all sales.
For those still looking to jump into the market, this two-bedroom, one-bathroom fixer-upper is being advertised to handy investors at just $425,000.
Median home list price: $323,175
In Cincinnati, the portion of homes being bought by investors with mortgages surged before the COVID-19 pandemic, making up about 1 in 11 mortgages. But in 2022, they dropped to about 1 in 20.
Charles Tassell, the chief operating officer at the National Real Estate Investors Association, who is based in Cincinnati, says he watched as property values in the area appreciated rapidly in the late 2010s, which, combined with low interest rate mortgages, attracted boatloads of investors.
In Deer Park, OH, a suburb where Tassell lived for several years, homes used to sell for $60,000 to $130,000 in the 2000s. In the past few years, however, their price tags have shot up to the $150,000 to $250,000 range.
With higher prices and mortgage rates, deals for investors have come with slimmer and slimmer margins.
“Until [prices] come down a little bit, [we’re] not going to see the investors jump back in strongly,” Tassell says.
Watch: ‘Uncertainty Is Leading to Hesitation’: This Week in Real Estate
3. Boise, ID
Median home list price: $539,900
Boise has been at the top of hot real estate market lists for the past couple of years, with soaring demand and real estate values to match. Many buyers flocked to the city during the pandemic, especially those hailing from California in search of cheaper real estate and a lower cost of living. Builders, home flippers, and landlords jumped in with both feet.
However, the real estate market in Boise has since cooled. More new construction and more homes sitting longer on the market have given local inventory a boost. At the same time, there are fewer buyers in the market. So prices dipped nearly 2% in October from September. And prices rose just under 2% year over year in October. Those aren’t the kinds of numbers investors want to see.
By late 2020, 1 in every 7 mortgages was taken out by an investor. Most recently, the portion of mortgages going to investors matched the national figure of 5.7% in October.
4. Denver, CO
Median home list price: $620,000
Home prices in the Mile High City have steadily increased through the 2010s. That gave many local investors a sense of stability as they bought up properties they assumed would continue to go up in value.
But that changed at the beginning of 2022, as the market began to turn. Investor activity dropped as the wild price growth of the past few years came to an abrupt halt. The percentage of sellers cutting prices shot up about 189% year over year in October.
Some Denver listings, especially those with a price below the metro’s average, still are advertised as investor opportunities, like this midcentury, four-bedroom home in the southwest part of the city.
Median home list price: $405,000
Minneapolis is typically known for its shimmering lakes and having the largest mall in America—not for its real estate investors. But the portion of cash buyers, many of whom are flippers and landlords, has been rising since the coronavirus pandemic began.
And there are plenty of listings squarely aimed at investors. Take this four-bedroom home that’s almost 100 years old. It “needs a lot of work,” the listing explains, and is “suited best for investor.” The property is listed for $250,000, or about 40% below the median price per square foot in Minneapolis.
On the other end of the spectrum, this 6,600-square-foot, multifamily property is listed for $725,000, which is about 8% above Minneapolis’ median price per square foot. The listing boasts a new roof, siding, and appliances, and makes it clear who it’s aimed at: “Good cash flow investment property.”
Median home list price: $449,000
About an hour west of Boston, Worcester is the second-largest city in New England, and it became a hotbed for investor activity in the past few years, says Nick McNeil, the owner and broker of McNeil Real Estate in Worcester. But as the pandemic-era real estate surge has faded, so has investor interest.
Investment mortgages have now dropped to the lowest percentage on the list (tied with Louisville, KY, No. 9), at only 1 in every 32 mortgages.
“Investors have moved on. They’re not interested in Worcester anymore,” McNeil says. “Prices have gone too high.”
The area became a huge draw, he says, for investors coming from Boston with lots of cash or equity, looking to take advantage of the area’s relatively affordable housing stock. Now, McNeil says, investors are looking farther west and south, to smaller nearby cities where the same dynamic has yet to play out.
Median home list price: $320,000
Oklahoma City has been hot for investors for years, largely due to its more affordable home prices. The portion of mortgages going to investors there has ramped up for the past five years, hitting a high point of 1 in 7. But that number has receded significantly since.
Home prices have surged in the metropolitan area, rising 16.5% year over year in October. That slashes deeply into investors’ profits.
This three-bedroom home in a suburb north of downtown is offered with seller financing, which means the buyer could potentially save with a lower mortgage rate. It’s advertised as “a great opportunity for an investor or an owner who likes a project.”
Median home list price: $219,900
Like many of the places on the list, the attractive home prices and ready inventory of Steel City attracted tons of investors during the pandemic. Home flippers flocked to the neighborhoods of Lawrenceville, East Liberty, and Garfield, boosting prices in these communities.
At its height, as many as 1 in every 14 mortgages went to an investor. In October, the figure was only 1 in 27.
The area is still seeing cash buyers make around one-third of purchases.
And there are still plenty of listings that offer shoppers an “investment” property, like this large three-bedroom home with garage space for four vehicles. It sits on more than an acre and is listed for just under $200,000. It’s described as “calling all investors.”
Median home list price: $299,900
Louisville, known for being the birthplace of Muhammad Ali and Kentucky Fried Chicken, has long been popular with investors due to its lower home prices and cost of living. At the height of the pandemic, as many as 1 in every 14 mortgages was for an investor buyer.
But prices have fast been rising in the metro, going up about 15.6% year over year in October. That’s led investor mortgages to fall to 1 in every 32.
For keen investors, there are still some investment deals to be had in the home of the Kentucky Derby, though. There is this historic 10,000-square-foot multifamily building near downtown Louisville. It needs some renovation, to be sure, and it’s listed for a cool million dollars. But the listing minces no words by starting its property description with this declaration: “INVESTMENT OPPORTUNITY!!!”
10. Dallas, TX
Median home list price: $449,999
Most people know that Texas offers a combo of low taxes and relatively affordable homes, says Debbie Murray, a real estate broker at Allie Beth Allman & Associates in Dallas. This explains much of the rush to Dallas in recent years.
But where it was possible to find a spacious single-family home for around $250,000 just a few years ago, she says, the entry point for the same home is now closer to $450,000.
“We are a declining market for investors,” she says, because they want to find a good deal, one that ensures a healthy return, and that’s harder and harder to find now.
Where 1 in every 13 mortgages went to an investor in late 2021, by mid-2022 only 1 in every 25 to 30 mortgages went to an investor buyer.
Like many of the places on the list, Murray says, Dallas had offered investors a relatively cheap way to buy, then fix up a home to rent it out or sell it again at a profit. But with appreciation and high interest rates, it’s just not the same opportunity it was even a year ago.
“If they’re not a cash buyer,” she says, “they’ve probably been priced out of the market.”
* Median metro home list price in October using Realtor.com data
The drumroll of bad tidings in the housing market was interrupted last week by a glimmer of good news. Finally.
Soaring mortgage interest rates, which have caused deep financial pain for many homebuyers and led to a freeze in the housing market, dropped by about half of a percentage point last week. They fell from above 7% to 6.6% for 30-year fixed-rate loans in the week ending Nov. 17, according to Freddie Mac.
Buyers shouldn’t celebrate just yet, though.
Many real estate experts believe the lower rates are a temporary reprieve, not a sign that rates will go back to the 2% and 3% ranges seen last year. In fact, many anticipate rates will return to around 7% this year.
“The sharp drop in mortgage rates this week opened a window of opportunity for buyers who are looking to lock in their rate. At the lower rate, they not only save money on their monthly payment, but a significant amount in interest over the life of the loan,” says Realtor.com® Manager of Economic Research George Ratiu.
But the good times aren’t likely to last for long, he says. “I still expect rates to potentially move back toward 7% in the next few weeks.”
The respite in rates will save buyers about $100 a month on their mortgage payments—and nearly $48,000 in interest over the life of a 30-year fixed-rate loan. (This assumes they put down 20% on a median-priced home of $425,000, not including taxes and insurance.) While that’s encouraging for buyers who have grappled with how to make the math of homeownership pencil out, prices are still high and rates haven’t cooled enough to make much of a dent.
But most experts believe the big increases in mortgage rates, which have more than doubled in the past year, are in the rearview. While they expect rates will fluctuate a bit, they predict mortgage rates will stay in the 7% range, but won’t go as far as 8%.
This “suggests that mortgage rates may have peaked,” Bright MLS Chief Economist Lisa Sturtevant says in a statement. The multiple listing service covers the mid-Atlantic region. But she cautions, “there will likely be ongoing volatility in rates amidst economic uncertainty.”
Why did mortgage rates fall?
Mortgage rates rise and fall for a variety of complex—and often competing—financial reasons.
As the Federal Reserve has raised its interest rates to combat inflation, mortgage rates have similarly shot up. Since inflation is still high, rates are expected to remain elevated as well.
“Inflation tends to really drive mortgage rates,” says Ratiu.
However, there are signs that inflation could be tapering off. The Fed scored a win earlier this month when the October inflation report was released. Inflation began to cool in earnest, going from a high of 9.1% year over year in June to 7.7% in October.
Watch: 5 Costs Buyers Should Prepare for During Closing
That cheered investors, who also play a big part in determining the direction of mortgage rates through the mortgage bond market. Lenders typically bundle up mortgages they make and then sell them to investors to free up more cash to make new loans.
When inflation is high, investors seek higher returns on their purchases of mortgage-backed securities, aka mortgage bonds, in the form of higher mortgage rates. Since inflation appears to be responding to the Fed’s actions, they’re hopeful that the Fed will slow its rate increases. So there isn’t as much pressure on rates to stay high.
“When there’s higher inflation, investors ask for higher returns. But now we see that inflation is cooling, the rates are cooling off as well,” says Nadia Evangelou, director of real estate research at the National Association of Realtors®. That doesn’t mean rates will stay a little lower.
“We expect [rates] to be volatile until we see even further deceleration of inflation,” adds Evangelou.
In addition, lenders are also doing their best to keep rates low enough to attract customers, says national real estate appraiser Jonathan Miller.
The problem with higher mortgage rates
Higher mortgage rates have essentially frozen the housing market.
Coupled with still-high home prices, many who had planned to purchase their first homes can no longer qualify for loans. Others have been forced to cut their homebuying budgets drastically. Despite home prices beginning to fall, they would need to plummet dramatically to outweigh the higher rates. So even though there are many who would like to become homeowners, they can no longer afford to do so. So home sales have dropped.
“If rates were cut right now, we would have another housing boom,” says Miller. “The demand is still there.”
The number of homes for sale is also still critically low. Builders worried they won’t find buyers for their residences are slowing the pace of construction. And sellers, most of whom are also buyers, are reluctant to give up their low mortgage rates to buy a home with a new loan with a higher rate.
“People are wedded to their mortgage rates, and they’re unwilling to become buyers with all the uncertainty,” says Miller.
In addition, many buyers don’t realize that mortgage rates have dipped, says mortgage broker Rocke Andrews, of Lending Arizona in Tucson.
“Hopefully, it means rates are topping out so people can begin planning their purchases,” he says. “Buyers may become a bit more interested in going out to look at homes.”
And as high as mortgage rates are today, they’re still substantially lower than they have been. In 1981, rates peaked when they briefly topped 18.5% for a 30-year fixed-rate loan.
“What we have to have in mind, [is] it’s better than an 8% rate, which is the historic average,” says Evangelou.
Mortgage rates have skyrocketed this year, scaring many would-be homebuyers and sellers out of the market.
But even when rates seesaw lower, as they did this week, it still takes a toll on the housing market.
Why? Because when financial conditions are so erratic and unsettled, many would rather wait it out.
“Today’s homebuyers and sellers are dealing not just with higher housing costs, but more uncertainty as a result of fluctuating mortgage rates,” Realtor.com® Chief Economist Danielle Hale says in her weekly analysis. “The uncertainty is leading to hesitation.”
We explore the ramifications of when borrowing costs zigzag all over the place, keeping both homebuyers and sellers on edge, in our column “How’s the Housing Market This Week?”
Wait, why are falling mortgage rates bad?
Which brings us to now: For the week ending Nov. 17, interest rates on 30-year fixed-rate loans not only teetered, but also tumbled to 6.61%.
Lower rates are absolutely a boon for buyers, sellers, and the overall housing market. As Hale points out, this kind of move means a savings of about $100 per month for buyers using a mortgage to pay for 90% of a home costing $425,000, which was the median price in October.
But there’s a caveat: “Expanded purchasing power is undoubtedly a good thing for today’s shoppers,” Hale says, “but fluctuations make it difficult to budget and plan for buyers and sellers alike.”
What a stagnant housing market looks like
As both buyers and sellers hesitate, waiting for things to settle down, the housing market is stagnating. What does that look like?
For starters, fewer sellers list their homes, since they’re dubious they’ll even get an offer—and even if they do, many would have to buy a new home at what might be double the interest rate they currently have.
And the most recent statistics bear this out: For the week ending Nov. 12, the number of new listings fell by 18% compared with a year ago, marking the 19th straight week of declines.
Meanwhile, wannabe buyers—daunted by darting interest rates and high home prices—might drop out. So homes that are currently on the market sit longer, too.
In fact, for the week ending Nov. 12, overall inventory (including new listings and stale ones still stuck on the market unsold) increased by 45% from a year earlier. Plus, homes lingered on the market for eight additional days than they did at this time last year.
And when listings look stale, they’re often less likely to get snatched up, and that makes sellers less likely to list in the first place—and so on. It’s a dangerous cycle.
What do changing mortgage rates mean for home prices?
So many competing dynamics at work in the market lead to both good news and bad news about home prices.
First, the bad news: Prices are still rising. In the most recent week, home prices increased by 11.1% compared with that same week last year. That growth is its 46th week at a double-digit pace.
Now, the good news: Price growth, though still strong, has been slowing.
“The pace of median listing price growth could move back into single-digit territory just before the end of the year, and with this week’s step-down, that possibility is still very much on the table,” Hale predicts. “This means the typical asking price will near, but not likely slip below, $400,000 again this year.”
Calling all happy campers! A newly constructed farmhouse with a fanciful trailer resort in Prairie Grove, AR, is this week’s most popular listing on Realtor.com®.
Called Flamingo Springs, the 60-acre property is a “1950s Palm Springs–inspired trailer resort,” according to the listing. You can live in the new farmhouse, which sits on its 2 private acres, and operate the charmingly retro RV park.
Other digs that drew your clicks include a fanciful, butterfly-covered cottage in California, a cute castle in New Hampshire, and a Frank Lloyd Wright-inspired time capsule in Ohio.
For a full look at this week’s 10 most popular homes, keep scrolling.
Why it’s here: This magnificent San Francisco Bay mansion has slashed its price nearly in half since it was listed last year.
The spectacular 8,131-square-foot mansion on Belvedere Island features a front-row view of the Golden Gate Bridge and the city skyline. Designed by architect Charles Gwathmey, the four-bedroom home offers incredible views from every room inside the four-level home.
Other luxury amenities include a wine cellar, media room, infinity pool, and detached guesthouse.
Why it’s here: This bargain-price log cabin sits on a whopping 20 acres of privacy.
The cozy cabin nestled in the woods features a loft bedroom and a wood stove. Offering simple living at its best, the cabin is the perfect spot to enjoy nature while listening to the Wilson Creek that runs through the property.
A sauna, shed, outhouse, and woodshed are also included.
Why it’s here: This stone home sits on 61 acres filled with wooded trails and streams.
Built in 1803, the four-bedroom Georgian Colonial has been modernized over the years. It features custom lighting, a chef’s kitchen, and updated bathrooms. Period details include 19th-century stonework, hearths, exposed cedar beams, and built-in bookshelves.
The spacious primary suite offers spectacular views of the pristine property.
Why it’s here: When his wife started losing her vision, the homeowner decided to decorate the exterior of their home with colorful designs of butterflies, which she could still see. The P.G. Butterfly House is now fully covered with the winged creatures, and it has become a popular tourist attraction.
The inspiration for the butterflies comes from the town itself. The annual migration of monarch butterflies happens each October through February in this coastal town nestled between Monterey and Carmel.
On the market for the first time, the home offers two bedrooms, two baths, hardwood floors, and a private yard.
A new owner could become the steward of this local landmark or create something new.
Why it’s here: This stone farmhouse on 3.5 acres is up for auction after Thanksgiving. The three-bedroom, 2,500-square-foot dwelling dates to 1840, and has period elements like a stone fireplace and exposed wood beams.
Other features include a two-story barn, outbuildings, partly wooded land, and a pond. The property is being sold as is.
Why it’s here: On the market for the first time in 30 years, this five-bedroom bungalow on a corner lot is a period gem. Spread across
Why it’s here: Built in 2000, the castle was originally constructed for medieval reenactments, according to the listing. But this very affordable castle-style abode also can serve as a year-round regal residence.
The 8-acre property abuts conservation land and offers hillside views and meadows. It also fronts the Mascoma River.
The 1,325-square-foot, two-bedroom home features an open kitchen and living area with cathedral ceilings and a wood-burning fireplace. There are five outbuildings for shop space, horses, or storage.
The area features mountain biking, hiking, and ski areas nearby.
Why it’s here: Midcentury modern fans will delight in this time capsule. The Frank Lloyd Wright-inspired space features walls of windows, built-ins, and exposed brick that all hark back to an earlier era. The three-bedroom, two-bath home measures 1,803 square feet. It sits on almost an acre and incudes a second, buildable parcel.
The property is pending sale after 10 days on the market.
Why it’s here: This splashy estate overlooking Sarasota Bay drew a frenzy of clicks. The homeowner is marketing executive Pam Sowder, who boasts 203,000 followers on Instagram, has written a book (“Rich Girl, Poor Girl”), and hosts the “Pam Sowder Podcast.” She and her husband picked up the property in 2014 for $5,725,000, so they’ll more than double their money with a full-price sale.
The 8,000-square-foot mansion offers six bedrooms, nine baths, a library, office, wine cellar, media room, guest apartment, gym, and elevator.
The outdoor oasis includes a kitchen, an infinity pool and spa, and a boat dock with a boatlift. This estate is close to St. Armands Circle, where you can find fine dining, world-class shopping, and beautiful beaches.
Why it’s here: A Palm Springs–inspired trailer resort known as Flamingo Springs drew thousands of views this week.
The resort features seven vintage travel trailers from the 1950s to the ’70s. The fun and funky trailers have been renovated and sport TV themes from shows such as “Friends” and “Schitt’s Creek.” They come with “heavy doses of art, nostalgia, and creative magic,” the listing notes.
The trailers, which are available for rent, are permanently parked in a semicircle surrounding a pool, astroturf, and a fire pit. There’s also Quonset hut clubhouse with a kitchenette.
Construction is nearly complete on a modern farmhouse, which sits on its own 2-acre lot on the 60-acre property. Aspiring resort owners could live in this sweet, brand-new home while running the charmingly retro trailer campground.
For more than a year, renters have reacted with horror as landlords across the country jacked up monthly rents by previously unthinkable amounts. But finally, rents have begun to drop.
Much to the relief of tapped-out tenants, median monthly rents fell a bit in October, hitting $1,747 nationally, according to a recent Realtor.com® report. Rents were down about $25 a month from September and $47 from their peak in July. And while rental prices were still up 4.7% year over year, October had the lowest jump in rental prices in 18 months.
“The rental market is showing signs of returning to normal,” says Jiayi Xu, a Realtor.com economist. “Renters may start to feel a little bit of relief.”
The report looked at apartment complex, private condo, townhome, and single-family home rentals in October. Only studio, one-bedroom, and two-bedroom units were included.
The rental market generally peaks during the summer, when families are trying to secure housing before children start school and college students are trying to lock down housing. Demand typically slows in the fall and winter.
“Going forward, I think the rent will continue to grow but at a much lower rate,” says Xu.
Rents went up the most for studio apartments, rising 6.7% year over year. They were up 4.5% for one-bedroom units and 3.7% for two-bedroom abodes.
However, renters shouldn’t breathe a sigh of relief just yet. Most landlords plan to increase rents on at least one of their units within the next year, although not by as much as they did, according to a recent Avail survey of more than 2,700 independent landlords and renters. (Avail, which assists landlords, is owned by Realtor.com.) Fewer than 1 in 5 landlords plans to hike rents by more than 10%.
Almost two-thirds of renters who have lived in their homes for one to two years have seen their rents go up—and just 6% were able to negotiate smaller increases than their landlords initially sought, according to Avail. The higher rents make it more difficult for many tenants to save up for homeownership. As a result, nearly 70% of renters are considering moving to cut costs. They’re hoping to save about $200 a month.
“While it’s encouraging to see smaller price increases, it’s important to understand that many renters have already absorbed large increases in their monthly rental costs over the past several years,” Ryan Coon, vice president of rentals at Realtor.com, says in a statement. “High inflation and the cost of upkeep and repairs are hitting landlords, who have had to raise rents to cover their higher cost of owning the properties and making it unlikely that they’ll be open to negotiating with new tenants.”
Just four of the 50 largest metropolitan areas saw double-digit, annual price increases in October, according to Realtor.com. Chicago led the pack as rents soared 23.7% year over year in the Windy City. It was followed by Providence, RI (13.6%), Boston (12.8%), and New York City (12.7%). (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Meanwhile, rents fell in eight of the 50 largest metros. Riverside, CA, experienced the largest year-over-year drop in October at -4.7%, according to Realtor.com data.
“A year ago, it was five to 10 applications for every rental. And now there’s maybe none,” says Doug Shepherd, a Riverside-based property manager and real estate broker at Better Homes and Gardens Real Estate Champions. “Demand just dropped off pretty dramatically in October.”
He attributes the decreased demand to general inflation and to the most motivated buyers and sellers already having secured housing. There’s a limit to how much renters can afford to spend each month—especially as inflation has pushed up prices for gas, food, and just about everything else.
“Everything’s more expensive,” he says. “And now the market has to adjust down.”
Rental prices also fell in New Orleans (-3.7%), Sacramento, CA (-3.4%), Las Vegas (-2.5%), Tampa, FL (-2.5%), Phoenix (-1.6%), Atlanta (-0.8%), and Memphis, TN (-07%). Buffalo, NY, was flat with a 0% increase.
Home prices will fall by 8% next year, but high mortgage rates and a possible recession will continue to hurt affordability, a new report says.
In a report published this month, independent research firm Capital Economics warned that sales will slump and housing prices will fall over the coming year.
With lending standards still tight and affordability poised to worsen, consumers should expect their purchasing power to deteriorate even as housing prices fall, the group said.
“Given that we are unlikely to see an improvement in affordability anytime soon, many buyers will be priced out of the market, while others will simply be unwilling to make a purchase,” the report stated. “As bidders become scarcer, market power will shift further from sellers to buyers.”
Sellers, many of whom now have mortgages with ultralow rates, will be forced to accept lower prices over the next year, the research firm said. After mid-2023, when Capital Economics forecasts home prices to fall by 8% compared with this year, consumers can expect price growth to recover to 2.5% by the end of 2024.
“As bidders become scarcer, market power will shift further from sellers to buyers.”
The group also expects mortgage rates to “hold close to 7% over the remainder of next year,” which means affordability will be at its worst since 1985.
For a median-income household buying a median-priced home, the mortgage payment as a share of income rose to 28.5% in October 2022 from 13.3% in May 2020, the group said.
The median listing price for a home in the U.S. is currently $425,000, up 13% over the last 12 months, according to Realtor.com. (Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp. )
Mortgage rates will go back down to 5.75% by the end of 2023, the Capital Economics researchers forecast in the report.
The group also expects that the U.S. economy will fall into a “mild recession” in 2023 and that sales of single-family homes will fall to the lowest level since 2011. It also expects single-family-home starts, or new construction, to fall to the lowest level since 2014. The market will recover in 2024, the report said.
Even though prices are expected to fall, people may still find it hard to afford to buy a home, meaning that more prospective buyers will likely move into the rental market, the report noted.
Some good news: Buyers can expect a surge in new supply next year as builders complete construction on homes, which will prompt rents to fall 0.5% in 2023, the report said.
To find the hottest real estate markets in America, head to the coldest parts of the country.
The most desirable places for homebuyers today come with one bone-chilling caveat: Many of these hot spots lurk in the snowier Northeast and Midwest, according to a recent Realtor.com® report. And while some house hunters might not love colder weather, most are likely to appreciate the cooler home prices and lower cost of living in these areas.
The Manchester, NH, metropolitan area, an hour north of Boston, took the No. 1 spot—for the 11th straight month! The Rochester metro, in New York state near the Canadian border, came in second after tying with Manchester for first place last month. (Rankings are based on the number of views that listings in these metropolitan areas receive on Realtor.com, and how quickly properties are selling.)
“In the South and West, which contain warm markets that were really popular even before the [COVID-19] pandemic, prices have just been driven so high,” says Hannah Jones, an economic data analyst at Realtor.com. “Even if they’re places people might enjoy living, many buyers have been priced out.”
Why does Manchester dominate the hottest markets?
While Manchester metro prices are a little higher than the national average of $425,000, that hasn’t stopped the small city from dominating the hottest markets list.
The reason: Homes here still sell for much less than properties in Boston. The median list price in Manchester was $495,000 in October—compared with $745,000 in the Boston metro area. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Manchester is now essentially “a suburb of Boston,” Jones notes. The commute is also more feasible for many buyers if they can work remotely or need to go into their offices only one or two days a week.
Rochester is also popular with buyers because it’s still so affordable
In contrast, Rochester isn’t a suburb of anything but very much its own city. The Rust Belt metro, where camera maker Kodak is headquartered, has struggled over the decades, which explains the lower home prices. The median list price in this cold weather metro was just $225,000 in October.
“The story with the Rust Belt is really that people are able to optimize for quality of life,” Jones says. “You get more space and areas that have strong economies but are more affordable. You can get a lot for your money.”
In fact, there are no metro areas in the West or the South among November’s top 20 hottest markets. The West has long been a much pricier region of the country, while much of the South is starting to move out of reach after two years of turbocharged growth throughout the pandemic.
For Rochester, a strong economy includes several world-class universities, including the Rochester Institute of Technology and the Eastman College of Music, as well as the industry those schools’ graduates help foster. The city was named No. 1 in the country as a technological hub by a 2021 MIT study, for example. And music fans don’t just get to take advantage of performances at the college: The city also boasts an internationally known jazz festival and fringe festival.
Danielle Riley, the owner of Rochester-based Better Homes and Gardens Real Estate Prosperity, traces her own history back several generations in the city. And while few think of the area as a “beach town,” the city lies along the shores of Lake Ontario. It’s also about an hour from New York’s Finger Lakes region, with its outdoor recreational opportunities and wineries, as well as one hour from Buffalo, NY, where she can go watch NHL games.
“It’s got a large population, but it’s like a small town,” Riley says. “It’s the best of both worlds.”
And what about that cold weather?
“I just can’t see celebrating Christmas when it’s 80 degrees out,” Riley says.
Watch: The 10 Very Best U.S. Cities for Homebuyers
FHA loans – the backbone for U.S. affordable housing – has enough money in reserve (MMI Fund) to weather any recession-caused uptick in foreclosures.
Everyone’s heard about how high interest rates are making once-affordable homes nearly impossible to pencil out. And with few homes for sale across the country, and prices still historically high—even if they are coming down a little bit—potential buyers have been in a rough spot for most of 2022.
But there are some metros that offer some hope for home shoppers—places where they might be able to submit a lowball offer under the seller’s asking price. These are cities where savvy home shoppers would be wise to put in an offer below the asking price, insist on contingencies like home inspections, and even negotiate other parts of the deal that could potentially save them some serious cash.
Yes, these places do exist—and the Realtor.com® data team found them.
The places on the list are marked by big price swings over the past few years—but sharp declines in demand in the past few months. Prices in these real estate markets appear to be out of sync with the new realities of higher mortgage rates—hovering around 7%—and fewer out-of-town buyers coming in with larger and all-cash offers. More homes in these metros are piling up as they’re up for sale longer. And with fewer buyers, many sellers have been slashing prices.
“I do see a mismatch in pricing with [mortgage] rate increases as part of that landscape,” says George Ratiu, a senior economist and manager of economic research at Realtor.com. “Yes, they are emerging markets with promising economies. Yes, they are popular for newcomers. But are they possibly overpriced, given local earnings? It seems so.”
Monthly payments are up hundreds or even thousands of dollars more because of the spike in mortgage rates. Prices will eventually have to reflect that reality. That’s why it often doesn’t hurt to make an offer below the list price on a home that has been sitting on the market for a while; sellers who need to sell may be amenable to a compromise.
“It’s a really good time to make a low offer,” says Santa Cruz, CA, real estate agent Jason Madani, of Room Real Estate. “A lot of sellers have priced too high.”
To figure out where market conditions suggest sellers might be open to negotiations, we looked at several metrics for the 300 largest metropolitan areas. We identified areas that had above-average increases in the number of homes for sale; the number of days listings spend on the market; and the number of listings with price reductions. Then we ranked the areas based on where the median home price shot up the most over the past three years, but where prices have remained close to their peaks.
We selected one metro per state to ensure geographic diversity. Metros include the main city and surrounding towns, suburbs, and smaller urban areas.
Median listing price: $275,000*
In the past few years, home prices have surged in Rocky Mount, a small city with growing biomedical pharmaceutical, manufacturing, and tech industries, about 45 miles east of Raleigh. The median home list price in the metro area more than doubled from $131,000 in October 2019, to a peak in September of $283,000, finally dipping a little in October.
Jay Hooks, a longtime real estate agent in the area with Moorefield Real Estate, says he’s never seen a surge in prices like this. And with the skyrocketing prices, came equally fever-pitched demand, he says.
“It was almost impossible to get a house on the market before you had an offer,” Hooks says.
Hooks says the area’s historically low price is what proved so attractive to people looking for more affordable housing during the COVID-19 pandemic. Many were able to work remotely at least part of the time. Prices are significantly lower than in the nearby Raleigh metro, where homes cost a median of $452,600 in October.
What that’s created, Hooks says, is an environment where sellers want to list for top dollar—even if that might not work to their advantage.
Hooks thinks the Rocky Mount market could see prices come down some, mostly due to the initial overpricing he sees. But the area’s proximity to Raleigh with a more rural lifestyle, should keep prices strong, he says.
More than half of those looking at Rocky Mount area homes on Realtor.com are from out of state, says Ratiu.
“So clearly a lot of outside dollars were driving those prices up,” he says.
Median listing price: $345,000
The pandemic widened the commute radius for home shoppers who no longer had to go into their offices five days a week—or at all. That gave areas that might have previously been too far from a big urban center a boost as they became more realistic alternatives to the bigger, more expensive cities.
Enter East Stroudsburg, about an hour and fifteen minutes west of New York City, in the center of the Poconos. This idyllic and historic getaway for East Coasters looking for a mountain retreat, known for its lakes and skiing, became a residential possibility for New Yorkers who had the flexibility to work farther from Manhattan. Realtor.com named the metro one of the most affordable vacation destinations earlier this year.
Nearly two-thirds of interest in the market’s listings comes from outside Pennsylvania, says Ratiu. Meanwhile, just 11% of page views are coming from local home shoppers.
Home prices surged during the pandemic, from around $185,000 for the median home, to a peak of almost $350,000 earlier this year. That’s been tough on locals as the area has long struggled with higher unemployment than the national average.
Watch: The 10 Very Best U.S. Cities for Homebuyers
Median listing price: $475,000
Concord has been a popular destination for Bostonians looking for a city close enough to make easy trips to the city, while enjoying the benefits of living in New Hampshire—notably the low taxes and more affordable real estate. That helped the capital of New Hampshire climb to the top of the Realtor.com hottest markets list in June.
However, recently, more sellers have been reducing prices to attract buyers as homes are now sitting on the market for longer.
Pamela Young, a local real estate and broker with eXp Realty, says she’s seen buyers who are finding a lower-than-list-price offer is now a possibility.
“I had a buyer up in the Concord area,” she says. “He was able to pick up a fixer-upper for $259,000, which was $20,000 lower than the price tag.”
Young says she’s put a strategy in place to help buyers find properties where the price can be negotiated down.
“I contact the seller’s agent and find out if they’ve had any offers,” she says. “If they have, we don’t stray too much from the asking price. If they haven’t, then we can make an offer below the asking price.”
Median listing price: $368,675
Straddling the Chippewa River, 90 minutes east of Minneapolis, Eau Claire is an artsy town and the self-proclaimed “horseradish capital of the world.” It’s also seen home prices rise quickly, like many other areas, over the course of the pandemic.
But in the six months between April and October, the portion of listings with a price reduction quadrupled. And the number of listings has doubled since February.
Alas, the median listing price is as high as it’s ever been. With prices beginning to drop between 5% and 10% in nearby Minneapolis, Racine, and Madison, Eau Claire could be poised to come down in response as buyers become more emboldened to ask for more discounts.
This updated, four-bedroom home on a corner lot has a remodeled kitchen with stainless appliances. Its asking price was recently reduced by $20,000, or about 8%, after four months on the market.
New construction isn’t immune to the trend, either. For example, this new three-bedroom home in southeast Eau Claire, which has been on the market for more than a year, has had its price come down multiple times. It’s now listed at $23,000 below the highest asking price in February.
Median listing price: $359,900
Lakeland, named one of the best markets in 2019 for budget buyers and investors, became another popular pandemic destination.
The city, between Tampa and Orlando, saw prices increase from around $230,000 to nearly $370,000 in the past 2.5 years. However, the number of homes on the market in Lakeland has more than doubled in the past several months, introducing a lot of supply into the market quickly.
When there are more options for buyers, they have a lot more negotiating power. If one seller turns down a lower offer, they can move on to the next property.
In Lakeland, this large four-bedroom home on one-third of an acre was marked down $45,000—more than 10%—at the end of October, after two months on the market.
Median listing price: $314,000
Prices have never been as high as right now in Elizabethtown, about 45 minutes south of Louisville. The median listing price in this next-door neighbor to the Fort Knox military installation has risen from around $200,000 two years ago, to around $315,000 in October.
In June, the median home was selling in less than three weeks. But as the market has cooled over the past few months, it’s taking closer to two months to sell, illustrating how demand has pulled back while interest rates have risen.
This three-bedroom home in need of renovation was pending sale only after two price reductions, adding up to $23,400 down from the original $143,400 asking price in July, or a 16.4% discount.
Median listing price: $489,950
Kingston, a small city on the Hudson River, has exploded as a getaway destination in recent years. The area, about 100 miles north of New York City, has seen an influx of boutiques, high-end restaurants, and art galleries appealing to second-home and weekend getaway seekers from the city.
As a result, in just three years the median home price has gone from $320,000 to right around $500,000. However, fears of a recession and soaring mortgage rates are leading many would-be vacation-home buyers and investors to hit the pause button. And since many locals cannot afford these higher prices, sellers might be more open to accepting lower offers.
In the summer, only 1 in every 15 active listings had a price reduction. Now, one-quarter of homes for sale have had a price reduction. That gives buyers more ammunition to ask for fair prices.
Median listing price: $1,349,000
Even the uber-wealthy aren’t scooping up homes in Santa Cruz—an iconic, upscale California beach town on the northern tip of Monterey Bay—in the face of economic uncertainty and higher mortgage rates. As a result, the number of homes for sale has tripled since the beginning of the year.
At the same time, the number of listings that have been reduced has climbed from 1 in 10 to around 1 in 3.
“A lot of listings are just sitting there,” says Santa Cruz real estate agent Madani. “And they’re priced too high.”
He prefers to price homes low to drum up interest, which can lead to offers over the asking price. He recently listed a home for $650,000 that went on to sell for $780,000.
“Price it low enough to make it too good to be true,” he says.
Median listing price: $379,000
Even in more affordable Myrtle Beach, the beachside South Carolina golf haven and longtime vacation and retirement destination, homes aren’t selling like they were just a few months ago.
The number of listings on the market has nearly tripled since earlier this year, while prices have plunged. They’re down about 5% from nearly $400,000 in March.
This midcentury, three-bedroom home within walking distance to the beach has seen its price reduced several times, finally landing at $375,000, after being listed in June for $450,000. That amounts to $75,000, or almost 17%, off the listing price from just six months earlier.
Even newly constructed homes for sale have been steeply discounted, including this brand-new, three-bedroom home that’s now listed for 15% off the asking price just two months after it went on the market.
Median listing price: $349,950
Columbia, between Kansas City, MO, and St. Louis, may be best known as the home of the University of Missouri, the first university founded west of the Mississippi River. But it’s getting a reputation for its fast-rising home prices.
List prices in the fourth-largest city in Missouri spiked from $230,000 just before the COVID-19 pandemic began, to now nearly $350,000. And that’s despite the typical home now sitting on the market for the longest time in two years.
Now with the number of homes for sale more than double what it was in early 2022, the area could be ripe for offers below the recent peaks.
For home shoppers in Columbia, discounts are already easy to find. They include the $20,000 price reduction on this classically styled three-bedroom home near the Bonne View Nature Sanctuary, and the $30,000 discount on this brand-new three-bedroom home on the outskirts of Columbia’s city limits, whose price was reduced just weeks after being listed.
* Median list prices are as of October using Realtor.com data.