According to a recent report by Realtor.com, real estate markets in Austin, Raleigh, Las Vegas, Phoenix and Charlotte have slowed the most over the past year. In these five metropolitan areas, the time it typically takes to sell a home has increased significantly in 2022.
Looking ahead, housing markets like Austin, Raleigh and Las Vegas could also experience the biggest downturn in 2023. These, and many other metro areas across the country, are cooling rapidly after nearly two years of overheating conditions.
A “slower” housing market likely in 2023
A few days ago, the Realtor.com research team released its “September Housing Report” with data for the 50 largest metropolitan areas in the country. Among other things, this report showed that it takes longer to sell a home these days, compared to a year ago.
And that’s no surprise, considering all the headwinds that are headwinds for the real estate market in 2022. Soaring mortgage rates. Higher house prices. General inflation. These trends have made many potential buyers wary (or unable of) make a purchase.
It is therefore not surprising to see a slowdown in the pace of sales nationwide. And that is exactly what this latest report reveals.
According to the September 2022 Realtor.com report:
“The typical U.S. home spent 50 days on the market in September, up seven days year-over-year from an annual increase of four days in August, marking the first increase since the first days of COVID.”
These are national statistics. When we drill down to the city and metro level, we find that some housing markets have slowed much more. Austin, Raleigh, Las Vegas and Phoenix are among the fastest cooling real estate markets in the United States as of fall 2022.
Biggest slowdowns: Austin, Raleigh, Vegas and Phoenix
Over the past year, the five metro areas listed below have seen the greatest increases in “time on market”. This means they are experiencing the biggest housing market downturn, when measured among major metropolitan areas in the country.
|Subway station||Median days on market||Median DOM change, AA (days)|
|Austin-Round Rock, Texas||51||23|
|Raleigh, North Carolina||43||23|
|Las Vegas-Henderson-Paradise, Nevada.||48||17|
The middle column shows the median number of days homes have been on the market, based on data from Realtor.com. The column on the right shows how much this delay has increased over the last 12 months, in number of days.
Austin, Texas stood out in two ways. It had one of the highest “median days on market” among the 50 largest US metros, as well as the largest increase in time to market. In other words, a major downturn in real estate activity has made Austin one of the “slowest” real estate markets in the country.
Raleigh, Las Vegas, Phoenix and Charlotte round out the top five, in terms of the biggest increase in days on market.
What these five markets have in common
The five real estate markets featured above, and others like them, actually have several things in common. Over the past two years, these five metropolitan areas have experienced the following trends:
- A massive influx of buyers during the early days of COVID (2020).
- A sharp drop in the housing stock in 2020 and 2021.
- Skyrocketing house prices due to the above trends.
The above changes have accelerated these housing markets like never before, leading to an unprecedented level of competition among buyers. Now, however, real estate markets like Austin, Las Vegas and Phoenix have very different common trends:
- They are all experiencing significant inventory growth.
- They see a steady increase in the number of price reductions.
- They are steadily slowing down, with homes taking much longer to sell.
In the five housing markets above, the total number of real estate listings has increased by more than 50% over the past year.
Austin, Phoenix and Raleigh saw the largest year-over-year increase in housing listings. In fact, all three of these housing markets have seen triple-digit increases in the number of active real estate listings. Phoenix leads the pack with a whopping 167% increase in registrations, compared to a year ago.
These metropolitan areas have also seen an increase in the number of price reductions by sellers. A “price reduction” occurs when a seller lists a home at one price, only to later reduce it. Usually, owners reduce their asking prices due to a lack of demand and supply from buyers.
According to Realtor.com’s September Housing Report:
“Western metros posted the largest gains in listing share with price reductions, led by Phoenix (+32.3 percentage points), Austin, Texas (+27.4 percentage points percentage) and Las Vegas (+20.0 percentage points).”
So what we see here is a swing of the pendulum from one extreme to the other. Once-hot housing markets like Austin and Phoenix are now cooling much faster than other US metros. And this trend will likely continue into 2023.
Economists predict favorable conditions for buyers in 2023
All the trends mentioned above point to one thing. The US real estate market is steadily moving in a more buyer-friendly direction.
And that’s a huge change from what we were seeing in the second half of 2020 and throughout 2021. Back then, homebuyers across the United States were facing fierce competition, lightning-fast sales, bidding wars and a real estate market that strongly favors sellers.
But the Realtor.com report cited above, and many others like it, show that the market is currently moving in a way that favors buyers for a change. Many economists expect this shift to continue — and perhaps even intensify — as we approach 2023.
According to a Sept. 29 report from Zillow:
Skyrocketing mortgage costs are lowering competition among homebuyers, and a market firmly in buyers’ favor is expected next year, according to a majority of economists and housing experts polled in the latest survey. Zillow on Housing Price Expectations (ZHPE)”.
This was based on a survey of more than 100 economists and housing market experts, conducted between August 16 and 27 this year. As the report’s authors pointed out, rising home prices have created affordability issues in many cities, pushing many potential buyers away.
Many potential buyers have now been shut out of the market entirely due to rising prices and mortgage rates. And of those who can still afford to buy, some may be reluctant to do so for fear that prices will fall over the next few months.
While no one can predict future real estate trends with complete accuracy, one thing seems likely. The 2023 housing market could be much slower than what we are used to.