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Redfin: Pandemic Boomtowns Are Cooling

Sarah Wolak
Nov 28, 2022
home prices decline

Home-price growth has slowed fastest in pandemic boomtowns like Austin, Phoenix and Boise, with inflation and high mortgage rates to blame.

KEY TAKEAWAYS
  • In Phoenix, the price per square foot was up 6% from a year ago, down from nearly 29% in February.
  • The typical home in Phoenix, Austin and Boise sold for $500,000, a 30% increase over the last two years.

Home-price growth has slowed fastest in pandemic boomtowns like Austin, Phoenix and Boise as high mortgage rates and an uncertain economy deter would-be buyers, according to a new report from Redfin

Austin’s median price per square foot was up 1.3% year-over-year in October, down from about 24% year-over-year in February, when mortgage rates were still hovering under 4%. 

In Phoenix, the price per square foot was up 6% from a year ago, down from nearly 29% in February. Those 23-percentage-point drops are the biggest among the 99 most populous U.S. metros measured between February and October this year. 

Both Austin and Phoenix are places where home prices soared during the pandemic-era homebuying frenzy as remote workers flocked from expensive coastal cities to more-affordable Sun Belt destinations. 

Las Vegas, Boise and Sacramento are among the top 10 metros where price growth is slowing the fastest.

Phoenix, Austin and Las Vegas were among the metros that gained the most new residents in 2021. Redfin also noted that Phoenix, Las Vegas and Sacramento consistently rank on its list of most popular destinations for homebuyers moving in from out of town. Boise and its suburbs have been among the fastest-growing cities in the U.S. over the last few years, attracting many new residents from California.

Home prices have increased more than 30% over the last two years in Phoenix, Austin and Boise, with the typical home now selling for nearly $500,000 in all three.

“The forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that saw home prices skyrocket over the last few years,” said Redfin Senior Economist Sheharyar Bokhari. “Home prices can only rise by double digits for so long before the growth becomes unsustainable. High rates and stumbling tech stocks are making it unsustainable quite quickly, especially in destinations popular with tech workers. Plus, many of the out-of-towners with big budgets who wanted to move into those places already have.”

Home-price growth is also cooling particularly quickly in tech hubs, with San Jose, Oakland and Seattle all on the top 10 list. San Jose, where the median price per square foot fell about 2% in October, down from 20% growth in February, comes in third.

Buyers in the ultra-expensive Bay Area and Seattle markets are feeling the sting of high mortgage rates and stumbling tech stocks even more than the rest of the U.S. price growth has accelerated in five of the 99 most populous U.S. metros. Three are on the East Coast, one is in the Midwest and one is in Texas.

The median price per square foot was up 11.2% year over year in Albany, NY in October, up from a 2.8% increase in February. That’s the biggest price acceleration of the metros in this analysis. It’s followed by Bridgeport, CT, where the price per square foot grew 7.5% in October, up from 4% in February. 
 

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