(NEXSTAR) — Amid rising mortgage rates and fears of a recession, the once-torrid real estate market has cooled dramatically in some U.S. cities.
According to a study from Redfin, the top three and five of the top 10 are all located in California.
San Jose, California, where the median sale price is $1,560,000, cooled the fastest from February 2022 to May 2022. Sacramento, California ($610,000); Oakland, California ($1,070,000); Seattle ($850,000); Stockton, California ($576,000); Boise ($550,000); Denver ($612,000); San Diego ($875,000); Tacoma, Washington ($575,000) and San Francisco ($1,620,000) round out the top 10.
In Sacramento for example, the median price fell nearly 25%, year over year.
Part of the reason for Northern California’s prominence on the list is that high median sale prices combined with mortgage rates spiking to nearly 6% in spring have simply priced many out of the market.
“Would-be buyers are shying away because they simply have less money, both for down payments and monthly payments,” San Francisco Redfin agent Joanna Rose said. “More than half the buyers I see in San Francisco are tech workers, and many of them have seen their employers’ stock prices tumble over the past few months – in a lot of cases, that has cost people six figures.”
Then there’s inflation.
“People are paying way more for things like groceries and gas, so they don’t have as much in their monthly budget,” Rose said. “On top of that, monthly payments are a lot higher than they used to be, even if prices are slightly down, because of increased rates.”
The study also found that several cities targeted by remote workers looking for a change in lifestyle during the pandemic – Sacramento, Boise, Tacoma, Austin (16th place) and Phoenix (17th place) – have seen their attraction wane after demand-driven prices soared above what many could, or now want, to afford.
In contrast, the markets cooling slowest all have median home prices under $600,000 and are mostly located in the Midwest or Northeast.
Albany, New York, where the median sale price was $289,000, was number one, followed by El Paso, Texas ($238,000); Bridgeport, Connecticut ($570,000); Lake County, Illinois ($324,400); Rochester, New York ($212,100); New Brunswick, New Jersey ($465,000); Cincinnati, Ohio ($265,000); Akron, Ohio ($200,000); New Haven, Connecticut ($310,000); and Virginia Beach, Virginia ($325,000).
The real estate slowdown now has home builders bracing for tougher times, according to a survey obtained by MarketWatch from John Burns Real Estate Consulting.
“Scary times,” one Nashville-based home builder said. “Hoard cash and hang on for the ride!”
The monthly survey found that a quarter of builders across 84 markets are reducing prices as demand falters, while others are forced to cancel projects after buyers back out of contracts.
“Someone turned out the lights on our sales in June!” one builder in Atlanta told survey-takers.
The greatest rate of cancelations was in Texas, followed by the Southwest and Northern California.