Home prices have risen for several consecutive years amid tight inventoryalso High interest rates put the brakes on home ownership and investment, and are the first few dominoes It seems As housing prices begin to fall in some cities across the country, so do the declines. Is this a flash in the pan or a beginning? bigger trend?
Home prices fell in 15 U.S. markets
according to a recent reports According to the National Association of Realtors, U.S. real estate market values fell 7% in the first quarter of 2024. Check your credit score And call your mortgage broker. Let’s put this into perspective: These markets accounted for 15 of the 221 markets surveyed, so talk of a nationwide price freeze may be premature.
“It’s surprising that more than 90 percent of metro areas across the country experienced home price growth despite facing the highest mortgage rates in two decades,” said NAR Chief Economist. Lawrence Yun said the report. “In the current market, the direct cause of rising housing prices is the insufficient supply of housing to meet sufficient demand.”
this 15 markets saw value declines yes:
| metropolitan area | Year-on-year changes in house prices |
|---|---|
| Elmira, New York | -15.1% |
| San Antonio-New Braunfels (Texas) | -4.6% |
| Cape Coral – Fort Myers, Florida | -4.4% |
| Panama City, Florida | -3.8% |
| Boulder, Colorado | -1.7% |
| Salem, Oregon | -1.7% |
| South Bend-Mishawaka (Indiana-Michigan) | -1.6% |
| Logan (Utah-Idaho) | -1.3% |
| Baton Rouge, Louisiana | -1.1% |
| Peoria, Illinois | -1.1% |
| Shreveport-Bossier City, Louisiana | -0.9% |
| Myrtle Beach-Conway-North Myrtle Beach, South Carolina-North Carolina | -0.6% |
| Austin-Round Rock, Texas | -0.3% |
| Crestview – Fort Walton Beach – Destin, FL | -0.2% |
| Little Rock-North Little Rock-Conway (Arkansas) | -0.1% |
Why are home prices falling in these markets?
according to Red Fin InformationHome prices in Elmira, located on the border of upstate New York and Pennsylvania, are very affordable, with a median home price of $90,213 as of April 2024. Local REALTORS ASSOCIATION RULES As of the first quarter, the average home price was $146,000 and sales were down 10% annually. this By comparison, the national median home price is $393,500.
Nearly 30% of metropolitan areas The first quarter of 2024 saw double-digit price increases.The number of houses is down 20.5% Compared to 2022.
a turning point
The primary reason for the decline is that, like most markets on the decline list, Elmira (the city-county seat of Chemung County) has experienced unsustainable sales price growth despite being moderately priced. increased 17.8% November 2022 exceeds 2020 numbers and gentler growth After that, interest rates continued to rise until it appeared that a tipping point was reached and no rate increases were likely to occur.
The same thing is happening in other cities, such as Cape Coral, Florida,have experienced a Housing supply surges As high as 50%, this made the market loose, causing prices to plummet.
What does falling prices mean for investors?
Falling house prices may create a window of opportunity for investors. In places where home prices have fallen significantly, such as Elmira, gauging how far prices are likely to fall and timing purchases before interest rates drop can allow investors to make a judgment call before prices rise again.
However, it’s one thing to simply purchase a property whose prices have dropped to normal levels, but it’s quite another to ensure that there are tenants to fill the rental unit once it’s been purchased and renovated. this That’s where some research comes in.
If you want to live and work in Elmira, For example, Your employment opportunities may be limited. However, Elmira was chosen as the winner $10 million downtown revitalization plan On the south level and Strategic location between major commercial corridors. Additionally, the downtown area is active and walkable, the healthcare industry there has been growing, and there are some major developments and new housing planned.
Elmira College is also a local attraction. There are plans to build a stylish brewery-style pub with a large gaming area called Centertown Social is in the works, Drawing people to the city center year-round. New restaurants, juice bars and jazz clubs are also being built.
Given the low barriers to entry in terms of price, smaller cities like Elmira may be a viable way for opportunistic investors to purchase income-producing real estate at the start of an urban renewal cycle. However, must be emphasized Hop onto a small rundown city start The implementation of the revitalization plan is a high-risk, high-reward scenario. Elmira has long had a criminal reputation and lack of employment. Turning things around is by no means guaranteed.
Opportunities for flippers
Low inventory and rising home prices have seen brave flippers Despite soaring mortgage rates, they’ve seen recent deals turn in handsome profits. New report says that while flip rates are down overall across the country, those who stay in the game are still benefiting from a “strong sales environment” Burns, Sundaes and Kiavi Fix and Flip SurveyAccording to National Real Estate Data Corp. supporting role.
“Low inventory is causing the current frenzy,” one Seattle speculator said in the survey. “Once interest rates come down, things are going to get crazy” and the demand for flipping homes will increase.
Now that home prices are starting to fall in some markets, those speculators who are confident of rebounding after interest rates fall can plan their flips accordingly, completing projects to coincide with widely expected Federal Reserve interest rate cuts.
final thoughts
Low inventory in much of the country means that despite high interest rates, we’re unlikely to see home prices plummet. Distressed buyers were priced out of the market and faced the prospect of higher prices when interest rates fell.
However, there is still a window of opportunity for investors in areas where the market has effectively said “enough is enough” and home prices have begun to fall. Of course, the big unknown is interest rates. It’s not worth losing money on a negative number cash flow If you don’t have the financial wherewithal to weather the storm, take a risky flip every month and hope the price will go up.
However, for those who are well-positioned and able to play the long game in real estate, the temporary price decline presents an undeniable opportunity – but one that still needs to be thoroughly scrutinized potential market analysis.
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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
