What do New Orleans, Austin, San Antonio, Denver and Dallas have in common?
These cities have seen the largest drops in home value in August compared to the previous month of the 12 that experienced a dip, according to an analysis by the real-estate platform Zillow.
Compared to the same time a year ago, Austin, New Orleans, Phoenix, Las Vegas, and San Francisco faced the largest declines in value.
Meanwhile, Hartford, Buffalo, San Diego, Cleveland and Providence led the way in places where the value of homes went up in August from the previous month, the analysis showed. From a yearly look, Hartford, Milwaukee, Virginia Beach, Philadelphia and Providence saw the most jump in value.
Overall, home values went up 0.2 percent, but this illustrated a cooling after what Zillow described were “red-hot” gains over the last three months. The platform updated its home value index forecast lower to a little under 5 percent over the next year from last month’s projection of 6.5 percent.
“After housing market demand and activity peaked for the year in May and June, conditions have loosened in the later phase of summer,” Jeff Tucker, a senior economist at Zillow, noted. “Not only did price growth decelerate, but closed-sales data from July showed fewer homes selling above their list price (40.4%, vs. 41.5% in June).”
Part of the cooling was due to a jump of an increase in new listings appearing in the market, an analysis from Zillow showed early this week. A 4 percent rise in August compared to the previous month was the highest rise over a two-month period, although inventory was way below pre-pandemic levels, according to the real estate platform.
“Inventory conditions remain very tight. That said, this unusual late-summer supply uptick helped to ease market conditions some, causing our outlook for home values to cool,” Zillow said. “The tight inventory conditions and the persistence of elevated mortgage rates are also expected to continue to limit sales volume in the months to come.”
The analysis adds to a drumbeat of data suggesting that the housing market is grappling with high prices, low supply and high mortgage rate trends that have been exacerbated by high interest rates instituted by the Federal Reserve starting in March of 2022 to fight soaring levels of inflation.
The Fed held paused on its raising rates at the current range of 5.25 to 5.5 percent on Wednesday but left room for at least one more hike for later in the year.
An environment of high interest rates will continue to put pressure on mortgage rates that are now above 7 percent, the highest they’ve been in two decades.
“Given these high rates, housing demand is cooling off and now homebuilders are feeling the effect. Builder sentiment declined for the first time in several months and construction levels have dipped to a three-year low, which could have an impact on the already low housing supply,” said Sam Khater, Freddie Mac’s chief economist on Thursday.
Earlier on Thursday, the National Association of Realtors revealed that the number of houses available for sale was down 14 percent from a year ago. Overall, sales declined by 0.7 percent in August and plunged more than 15 percent to about 4 million from a year ago.