Expect to See More Severe Home Price Drops Here
The housing price gap is converging for the first time in a decade, affecting the most expensive areas.
Declines in housing prices concentrated in higher-priced areas and are causing U.S. price levels overall to move closer together, according to a new report from CoreLogic.
This is measured when considering home prices in real dollar terms rather than by percentages.
What CoreLogic is seeing is that the top markets for home price appreciation are somewhat different — and high-priced — in areas such as San Jose and Santa Barbara, which have entered the top 10 rankings thanks to base prices that were already at a higher level than most other areas of the country.
“At the same time, these cities had lower growth in home prices on a percentage basis,” writes its economist Thomas Malone.
“Thus, the geography of the pandemic-era boom was not so different from the home price appreciation trend that has been ongoing since 2012, in that the most expensive places in the country were stretching further from the cheaper areas.
Migration to Less-Dense Areas a Culprit
Malone said that in November, the regional price differences between median housing prices in the 20th and 80th percentile shrunk by 11.2% from the peak in July 2022, marking the first time since the housing crisis ended in July 2012 that the price spread has converged.
Housing prices appreciated the most in many mid-priced metros such as Austin, Tampa, and Phoenix.
“This increase in home prices is attributable to an influx of homebuyers who migrated to less-dense locations with lower prices to take advantage of their new ability to work remotely,” according to Malone.
The data suggests that when home prices go up, the dispersion of prices across the country increases, and when home prices decline, dispersion shrinks, according to CoreLogic.
“As prices begin to drop, the most notable declines are concentrated in some of the most expensive areas of the country, bringing housing prices across the country closer together,” writes Malone.
“This means that if the current pattern holds, we can expect to see more severe price drops in the most expensive areas of the country.”