(NEXSTAR) – Amid rising mortgage rates and fears of a recession, the once torrid real estate market has cooled significantly in some US cities.
According to a study by Redfin, the top three and five in the top 10 are all located in California.
San Jose, Calif., where the median sale price is $1,560,000, cooled the fastest from February 2022 to May 2022. Sacramento, Calif. ($610,000); Oakland, Calif. ($1,070,000); Seattle ($850,000); Stockton, Calif. ($576,000); Boise ($550,000); Denver ($612,000); San Diego ($875,000); Tacoma, Wash. ($575,000); and San Francisco ($1,620,000) complete the top 10 respectively.
In Sacramento, for example, the median price fell almost 25%, year over year.
Part of the reason for Northern California’s prominence on the list is that high median sale prices combined with mortgage rates hitting nearly 6% in the spring simply pushed many people out of the market.
“Potential buyers are hesitant because they simply have less money, both for down payments and monthly payments,” said San Francisco Redfin agent Joanna Rose. “More than half of the buyers I see in San Francisco are tech workers, and many of them have seen their employers’ stock prices plummet over the past few months – in many cases, it’s cost six figures to people. Then there’s inflation: people pay a lot more for things like groceries and gas, so they don’t have that much in their monthly budget. Plus, the monthly payments are a lot higher than before, even if the prices are down slightly, due to the increase in tariffs.
The study also found that several cities targeted by remote workers seeking a lifestyle change during the pandemic — Sacramento, Boise, Tacoma, Austin (16th place) and Phoenix (17th place), for example – saw their appeal wane after demand- driven prices soared above what many could, or now want, to afford.
In contrast, the slowest cooling markets all have median home prices below $600,000 and are mostly located in the Midwest or Northeast.
Albany, New York, where the median sale price was $289,000, was number one, followed by El Paso, Texas ($238,000); Bridgeport, Connecticut ($570,000); Lake County, Illinois ($324,400); Rochester, New York ($212,100); New Brunswick, New Jersey ($465,000); Cincinnati, Ohio ($265,000); Akron, Ohio ($200,000); New Haven, Connecticut ($310,000); and Virginia Beach, Virginia ($325,000).
The real estate downturn is now forcing homebuilders to prepare for tougher times, according to a survey obtained by MarketWatch from John Burns Real Estate Consulting.
“Scary times,” said a Nashville-based homebuilder. “Raise the money and hang on for the ride!”
The monthly survey found that a quarter of builders in 84 markets are cutting prices as demand weakens, while others are being forced to cancel projects after buyers pull out of contracts.
“Someone turned off the lights at our sales in June!” an Atlanta builder told investigators.
The highest cancellation rate was in Texas, followed by Southwest and Northern California.