According to a recent report from Realtor.com, the real estate markets of Austin, Raleigh, Las Vegas, Phoenix and Charlotte slowed have down the most over the past year. In all five of these metro areas, the typical time it takes to sell a home increased significantly in 2022.
Looking forward, housing markets like Austin, Raleigh and Las Vegas could experience the biggest slowdown in 2023 as well. These, and many other metro areas across the country, are cooling rapidly after nearly two years of overheated conditions.
A ‘Slower’ Housing Market Likely in 2023
A few days ago, the research team from Realtor.com published its “September Housing Report” with data for the nation’s 50 largest metro areas. Among other things, this report showed that it’s taking longer to sell a home these days, compared to a year ago.
And that’s not surprising, when you consider all of the headwinds working against the real estate market in 2022. Spiking mortgage rates. Higher home prices. General inflation. These trends have made many would-be home buyers wary about (or incapable of) making a purchase.
So it’s no surprise to see a slowdown in the pace of sales nationwide. And that’s exactly what this latest report revealed.
According to the September 2022 Realtor.com report:
“The typical U.S. home spent 50 days on the market in September, up seven days year-over-year compared to an annual increase of four days in August, which marked the first increase since the early days of COVID.”
Those are national statistics. When we drill down to the city and metro level, we find that some housing markets have slowed down a lot more. Austin, Raleigh, Las Vegas and Phoenix are among the most rapidly cooling real estate markets in the U.S., as of fall 2022.
Biggest Slowdowns: Austin, Raleigh, Vegas and Phoenix
Over the past year, the five metro areas listed below experienced the biggest increase in “time on market.” That means they’re experiencing the biggest housing market slowdown, when measured among the nation’s major metro areas.
|Metro Area||Median Days on Market||Median DOM Change, Y-Y (Days)|
|Austin-Round Rock, Texas||51||23|
|Las Vegas-Henderson-Paradise, Nev.||48||17|
The middle column shows the median number of days that homes stayed on the market, based on Realtor.com’s data. The column on the right shows how much that timeframe has increased over the past 12 months, in number of days.
Austin, Texas stood out in two ways. It had one of the highest “median days on market” among the 50 biggest U.S. metros, as well as the biggest increase in time on market. In other words, a major cooldown in real estate activity has turned Austin into one of the “slowest” real estate markets in the country.
Raleigh, Las Vegas, Phoenix and Charlotte rounded out the top five, in terms of the biggest increase in number of days on market.
What These Five Markets Have in Common
The five real estate markets shown above, and others like them, actually have several things in common. Over the past two years, all five of these metro areas experienced the following trends:
- A massive influx of buyers during the early days of COVID (2020).
- A sharp decline in housing inventory during 2020 and 2021.
- Skyrocketing home prices due to the above trends.
The above changes accelerated these housing markets like never before, leading to an unprecedented level of competition among buyers. Now, however, real estate markets like Austin, Las Vegas and Phoenix have very different trends in common:
- They’re all experiencing major inventory growth.
- They’re seeing a steady increase in the number of price reductions.
- They’re slowing down steadily, with homes taking much longer to sell.
In all five of the housing markets above, the total number of property listings increased by more than 50% over the past year.
Austin, Phoenix and Raleigh had the biggest increase in real estate listings, year over year. In fact, those three housing markets experienced triple-digit increases in the number of active property listings. Phoenix led the pack with a whopping 167% increase in listings, compared to a year ago.
These metro areas have also experienced an increase in the number of price reductions by sellers. A “price reduction” occurs when a seller lists a home for one price, only to reduce it at a later date. Usually, homeowners reduce their asking prices due to a lack of buyer demand and offers.
According to Realtor.com’s September Housing Report:
“Western metros posted the biggest gains in the share of listings with price reductions, led by Phoenix (+32.3 percentage points), Austin, Texas (+27.4 percentage points) and Las Vegas(+20.0 percentage points).”
So what we’re seeing here is a pendulum swing from one extreme to the other. Formerly red-hot housing markets like Austin and Phoenix are now cooling much faster than other U.S. metros. And this trend will likely continue into 2023.
Economists Predict Buyer-Friendly Conditions in 2023
All of the trends mentioned above point to one thing. The U.S. real estate market is moving steadily in a more buyer-friendly direction.
And that’s a huge change from what we were seeing during the second half of 2020 and throughout 2021. Back then, home buyers across the U.S. had to contend with fierce competition, super-fast sales, bidding wars, and a real estate market that strongly favored sellers.
But the Realtor.com report cited above, and many more like it, show that the market is currently shifting in a way that favors buyers for a change. Many economists expect this shift to continue — and perhaps even intensify — as we move into 2023.
According to a September 29 report from Zillow:
“Sky-high mortgage costs are driving down competition among home shoppers, and a market firmly in favor of buyers is expected next year, according to a majority of economists and housing experts polled in the latest Zillow Home Price Expectations Survey (ZHPE).”
This was based on a survey of more than 100 economists and housing market experts, conducted between August 16 and August 27 of this year. As the report’s authors pointed out, rising home prices have created affordability issues in many cities, which in turn has pushed many prospective buyers onto the sidelines.
Many would-be buyers have now been priced out of the market entirely, due to higher prices and mortgage rates. And of those who can still afford to buy, some might be reluctant to do so for fears that prices will drop over the coming months.
While no one can predict future real estate trends with complete accuracy, one thing seems likely. The housing market of 2023 could be a lot slower than what we’ve become used to.