Here Are Some Places in the U.S. Where Home Prices Are Falling Fast

Here Are Some Places in the U.S. Where Home Prices Are Falling Fast

According to a new report, Austin, Texas, once a tech powerhouse, is now among the country's fastest-declining cities.

Thanks to skyrocketing mortgage rates and slowing demand, Austin's home values ​​have fallen 3.5% over the past year, outpacing the top 100 markets in the U.S.

Austin's recent soaring home values ​​have been fueled by a booming tech industry and attractively low state taxes.

Those glory days appear to be fading, however.

Overall, home prices rose 4.9% nationwide in May.

But in a few notable cities, the story was different.

San Francisco saw a 2.6% decline, while New Orleans saw a 0.9% decline.

Cape Coral and North Port also felt the chill in Florida, with prices falling 0.6% and 0.2%, respectively.

A surge in mortgage rates to about 7% for a 30-year fixed-rate deal has dampened the market. In May alone, 16 of the 100 largest metro areas saw price declines, with El Paso, Texas; Gary, Indiana; and Buffalo, New York, among the top five.

Despite the slowdown, 34% of homes sold for more than asking in June, a jump from the pre-pandemic average of 23%.

The trend is driven by strong demand in markets with high prices and low inventory.

In May, about 100,000 borrowers were six months or more delinquent on their mortgages, a level not seen since before the financial crisis.

However, foreclosure rates fell to 0.2%, the lowest since early 2022, indicating that many delinquencies have been resolved in the late stage.

The share of adjustable-rate mortgage (ARM) originations hit a yearly high in May.

Adjustable-rate mortgages, whose rates fluctuate based on market conditions, are gaining momentum as fixed-rate mortgage rates rise.

Despite this, adjustable-rate mortgages still make up just 5% of outstanding mortgages, well below the 20% seen during the financial crisis.

In June, 8.6% of homes under contract were appraised for less than their selling price, down from 10.7% a year ago.

This shift is bringing appraisal gaps back to pre-pandemic levels, with smaller homes more vulnerable to overvaluation by first-time buyers.

Sales of newly built homes fell 17% in the first half of the year, with only Portland, Oregon, and Las Vegas, Nev., bucking the trend and rising 2% each.

Investor activity also slowed. In June, 23% of single-family home purchases were made by investors, down from 28% in January.

That's the lowest share of investors in two years but still above pre-pandemic levels.

Existing home sales fell 19% from a year ago in June, with an early seasonal slowdown likely driven by higher mortgage rates.

Still, pending sales in June were up 9% from 2023, suggesting a possible rebound.