Real estate experts have warned homebuyers to avoid Sun Belt states where prices could fall next year and instead focus on the Midwest and Northeast.
With mortgage rates stubbornly high at 6.7 percent and US home sales falling for ten straight months, Redfin chief economist Daryl Fairweather said hot markets in Austin, Phoenix and Las Vegas are likely to see declines. prices in 2023.
“If you want to avoid a situation where you buy a house and then its value goes down in the next few months, I would avoid the Sun Belt,” Fairweather told Fox Business.
Instead, the real estate expert said the safest investments would be in “the Midwest and the Northeast, because those areas tend to hold their value.”
Real estate experts advised homebuyers to avoid Austin, Phoenix, Las Vegas and other places in the Sun Belt because prices are likely to drop in 2023 and instead invest in the Midwest and Northeast, where houses retain their value.
Fairweather specifically cited Lake County, Illinois; chicago; Albany, New York; New Haven, Connecticut and Milwaukee.
While the Sun Belt states experienced a housing boom in early 2022, the sales slump has hit the region harder than most, according to the latest Redfin figures.
Among the nation’s most populous cities, Las Vegas, Phoenix and Austin led the pending decline in sales. Sales in Las Vegas fell 63.8 percent in November from a year earlier, Phoenix fell 58 percent and Austin 57.7 percent.
Overall in the US, existing home sales fell 7.7 percent from October to November, according to the National Association of Realtors, with November sales down 35.4 percent year-over-year. .
The NAR added that the current ten-month streak of declines is the longest recorded in data going back to 1999.
Phoenix, Las Vegas and Austin have seen the steepest drop in home sales among the most populous metropolitan areas in the US. Pictured: $400,000 home in Phoenix
Meanwhile, experts are forecasting a stable market up north, specifically in Lake County, Illinois, where $299,000 is well below the national median home price.
Austin saw home sales drop 57.7 percent from last November, with the median home price in the Texas city pegged at $540,000.
Vegas led the nation’s major cities in falling sales, down 63.8 percent. Pictured: Las Vegas home for sale at $380,000
With the market hurt, Fairweather advised buyers to look in the Midwest and Northeast, where many cities have homes for sale below the national median price index.
According to the latest figure, the national median home price fell to $415,000 in November, a notable decline from the $450,000 seen in June, when the market was more volatile.
The median home price in Lake County is currently $309,000, with Albany at $227,750 and New Haven at $245,000. Milwaukee has a median price of $180,000 and Chicago sits at $310,000, all below the national index.
“Those are going to be the types of investments that will really hold their value because people will always want an affordable option,” Fairweather told Fox.
Meanwhile, Austin’s median price sits at $540,000, with Phoenix and Las Vegas teetering near the national index at $408,000 and $385,000, respectively.
Despite the warning to avoid the Sun Belt in 2023, Fairweather projected that states would eventually see a rebound as the market stabilizes.
“While it may be a bit inflated now, there will continue to be strong demand for those locations for the long term,” he said.
Homes are expected to hold their value in cities like Albany, where this three-bedroom, two-and-a-half-bathroom home sells for just $299,000.
Homes in Chicago are also below the national median price. Pictured: A home for sale at $315K
New Haven is another key area to invest. Pictured: A four-bedroom house that goes for $250,000 in the city
Pictured: A four-bedroom Milwaukee home for sale for just $170,000
Existing home sales fell about 37 percent from their recent peak in January, when near-zero interest rates kept mortgage rates low.
The 30-year mortgage rate, which topped 7 percent in the first weeks of November, finally fell and averaged around 6.7 percent, down 6.9 percent from October.
The current rate is still more than double the 3.1 percent it was at the end of 2021.
As the Central Bank continues to raise interest rates to control inflation, the housing market is still cooling off.
The national median home price fell to $415,000 in November, a notable decline from the $450,000 seen in June.
The existing home sales rate has fallen 35.4 percent since January.
The 30-year mortgage rate fell slightly in November to 6.7 percent, down from 6.9 percent in October.
Slowing economic growth in the sphere of domestic acquisitions, including renovations, furnishings and landscaping, as well as actual home buying, is a key tenet of the Federal Reserve’s plan to slow the US economy.
The Federal Reserve recently signaled that it will continue to raise rates through 2023, and the fed funds rate, currently at 4.25 to 4.5 percent, will likely reach a range of 5 to 5.25 percent by the end of 2023. The current rate is the highest in 15 years.
The Wall Street Journal notes that because homes typically go live a month or two before the contract closes, the November home sales data largely reflects purchases made in September and October.
While higher mortgage rates are depressing some demand from homebuyers, supply is also affected, as homeowners who secured purchases at lower rates are discouraged from listing their homes.
Technically, the number of homes for sale has increased since this time last year because homes stay on the market longer.
“We have this weird market where there are fewer buyers and fewer transactions, but because of the limited supply there are still some multiple offerings happening and houses are still selling reasonably fast,” Yun said.
There were 1.14 million homes for sale or under contract at the end of November, down 6.6 percent from October and up 2.7 percent from November 2021.
If the current buying pace continues, there was a supply of homes on the market for 3.3 months at the end of November.