Housing markets in relatively affordable Midwest and East Coast metro areas are holding up better than anywhere else in the country, as the housing market begins to cool, according to a new report from Redfin.
The typical home in eight of the 10 markets costs less than the national median sale price of $407,000; New Brunswick, Maine, ($480,000) and Bridgeport, Conn., ($590,000) are the exceptions.
“Homes in places like Chicago and Milwaukee certainly got more expensive during the pandemic homebuying boom, but they’re still affordable compared with the rest of the country,” said Redfin Senior Economist Sheharyar Bokhari. “They’re slow to feel the impacts of economic headwinds like inflation and the Fed raising interest rates because the relatively affordable home prices make them attractive to house hunters seeking deals, and homes are already priced low enough that there’s not much room to fall. These markets don’t have much volatility.”
With mortgage rates around 6%, the typical monthly payment on a $310,000 home — Chicago’s median sale price — is $2,000. That’s up from about $1,600 with the 3% rates common at the beginning of the year, but smaller than the $1,100 monthly payment uptick on the typical home in Seattle, where the housing market is cooling quicker than any other U.S. metro.
On the other end of the spectrum, almost all of the housing markets cooling fastest are West Coast metros that were pandemic migration hotspots.
However, measures of homebuyer demand and competition are nearly as strong as they were in the beginning of the year in the housing markets cooling slowest. In Lake County, Ill., where the typical home sells for about $315,000, about 36% fewer homes sold within two weeks in August than a year earlier, similar to the 43% year-over-year decline in February.
The median price per square foot was up 9% from a year earlier in August, smaller than the 16% annual gain in February but still significant.
In Chicago, about 40% fewer homes sold within two weeks in August than a year earlier, which is about the same as the year-over-year decline in February. There were roughly 6% fewer price drops in August than a year earlier, with 23% of home sellers dropping their price in August, down from 29% a year earlier.
“There are still plenty of buyers looking for homes; many of them are people who didn’t stand a chance in last year’s competitive market but are relieved to see lower prices and fewer bidding wars,” said Chicago Redfin agent Ashley Arzer. “They’re willing to purchase a home despite rising rates because they finally have a window of opportunity to get an offer accepted. There are also a fair amount of sellers who want to list their home before a potential economic downturn.”
“Still," Arzer continued, "deals are more likely to fall through than last year. Some sellers expect to sell their home for the same price that their neighbor got in the spring, and they may not accept lower offers. And buyers are more willing to walk away if they run into a problem during the inspection period because their financial commitment is bigger due to high rates."
