Property values are dropping in these US cities

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Worried about falling property values as a landlord? Or maybe excited about lower prices as an investor?

 

Either way, the housing market looks far different today than it did even six months ago. Gone are the wild 50+% price jumps we saw during the pandemic. Real estate markets are coming back down to earth — and that’s not a bad thing. (Unless you’re a seller. Then it sucks.)

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Keep your finger on the pulse of real estate markets and housing corrections nationwide as you navigate investing in this infinitely weird economy.

Cities Where Home Prices Are Falling

If a picture is worth a thousand words, how much is an interactive map worth?

 

Of the roughly 900 U.S. cities tracked by Zillow, 81 of them saw home prices fall in the third quarter of 2022 (the most recent data available). Without further ado, they are:

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Most of these cities still boast higher real estate values today than they did a year ago. But we’re still in the early days of home prices correcting to more normal levels in some markets.

 

In fact, real estate markets are cooling quickly. When you look at last month’s home price change — as opposed to the quarterly change — the number of cities with falling property prices jumps to 123:

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In other words, the pace of cooling is accelerating. Every month, more U.S. housing markets find themselves in the red.

 

Some of those home price declines seem small, under 1%. But remember that the decline represents just a single month — a 1% monthly drop translates to a 12% annualized decrease in property values.

Why Are Real Estate Prices Falling?

I don’t want to overstate the point. Home prices in most US cities are still rising, albeit more slowly than they were six months ago.

Still, over 80 of the hottest housing markets of the pandemic are now crashing back down to earth. It doesn’t take an economist to understand that they shot up too far, too fast, and now they’re correcting back to what local incomes can support.

 

“Monetary stimulus during COVID distorted the real estate market,” explains Andrew Lokenauth, founder of Fluent in Finance. “Interest rates were at historic lows. Now with monetary stimulus being withdrawn, home prices will gradually decline. Areas that saw the greatest speculation and increase in prices will see the greatest decrease in prices. Areas that saw moderate price increases will see prices flatten out or decrease slightly.”

 

Because, ultimately, people have to be able to afford their homes. When housing prices stray too far from local median incomes, expect a correction. Mark Zandi, the chief economist for Moody’s Analytics, warned that 97% of the nation’s cities are “overvalued” compared to local incomes. Of the 392 markets they analyzed, 149 are overvalued by at least 25%. Zandi expects the most overpriced housing markets to fall as much as 10% over the next year.

 

But a disconnect from local fundamentals isn’t the only reason home prices are dipping in some markets.

The Role of Rising Interest Rates

When the Federal Reserve raises interest rates, it puts upward pressure on mortgage rates. That, in turn, drives up the cost to own real estate in the form of higher monthly payments for the same loan amount.

 

Which means people just can’t afford to pay as much for properties.

 

Mortgage interest rates rose from around 3% at the beginning of 2022 to between 5.5 and 6% in the second half of the year. Consider that a 30-year $400,000 loan at 3% interest costs $1,686 per month, while the same loan at 6% costs $2,398. That’s over $700 more per month!

FIxed Rate Mortgage

At a 6% interest rate, a family could only borrow around $280,000 if they wanted a similar monthly payment ($1,679). So, rising interest rates force buyers to either pay cash, offer less, look at cheaper homes, or sit on the sidelines and continue renting.

 

None of which push up property prices. Quite the opposite, in fact.

Where Are Property Values Headed?

In most markets, real estate prices will likely just slow down and level off.

 

But in the cities where home prices skyrocketed by 40​​–50% annually during the pandemic? Those are likely headed downward, between 5–20%. They overshot what local buyers can afford, and now comes the correction.

 

Remote work plays a role as well, in multiple ways. Some people (like me!) will never work in a traditional office again. “With the workforce moving increasingly towards hybrid and remote workplaces, many people are moving out of cities and into less dense areas, investing in more rural real estate,” explains Matt Woods, CEO of SOLD.com.

 

But the reversal of remote work is also at play. Plenty of employees are heading back to the office, which means that all those beach and mountain getaways where people holed up during the pandemic might surrender some of their price gains.

 

Underlying these population movements, the US still has a housing shortage, and it’s not evenly distributed. Don’t expect home prices to crash 20​​–35% as they did after the housing bubble of the Great Recession.

The (Continued) Housing Shortage

The statistics vary, depending on who you ask. But here are a few to chew on.

 

Moody’s Analytics estimates the housing shortage in the US at 1.6 million housing units. Mark Zandi put it like this: “It’s very difficult to know precisely what the shortage is. But the bottom line is, no matter what the estimate is, it’s a lot of homes that we’re undersupplied.”

report by Up for Growth calculated the housing shortage at more than double that figure, at 3.79 million housing units. But that shortage isn’t evenly distributed across the US. Some markets have plenty of housing to meet local demand, while others have nowhere near enough. Check out this map breaking down housing undersupply by state:

Housing shortage by state

Real estate platform Homelight notes that 12.3 million households were formed between January 2012 and June 2021, but only 7 million new housing units were built. That leaves a shortfall of over five million homes. (For more details, check out their breakdown of why the US has a housing shortage.)

Bottom Line

The US still needs more housing, so home prices aren’t going to crash nationwide. Still, some markets saw home prices spike too far, too fast, and they’re going to adjust back to reality.

 

One piece of good news? Rents seldom dip, so rental properties are largely recession-proof.

 

Keep an eye on your home real estate market’s trends. But most of all, watch out for flipping houses right now, and stick with a long-term buy and hold strategy. You can forecast long-term cash flow accurately with a rental income calculator — the same can’t be said for predicting appreciation.

 

Where do you see real estate values headed? Why?

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This article originally appeared on SparkRental.com and was syndicated by MediaFeed.org.

These are the states with the most home foreclosures

 

Despite the economic fallout and job loss from the pandemic, the number of US properties with foreclosure filings in April was 11,810, down 17% from April last year (when foreclosures dropped precipitously), according to ATTOM Data Solutions.

 

This is likely thanks to the COVID-19 foreclosure moratorium for federally guaranteed mortgages, which has been extended to June 30, 2021. (Note: President Joe Biden’s executive order also extended the mortgage payment forbearance enrollment window to June 30, 2021.)

 

April foreclosures were also down, albeit slightly, from March, specifically 0.005%. Read on for the top 30 states with foreclosures in April 2021—plus top counties within those states.

 

Two regions had seven of the top 10 states. The Midwest had three –Illinois, Indiana, and Ohio — while the South had four: Delaware, Florida, South Carolina, and Louisiana. The West Coast appears with California and the East Coast with New Jersey.

 

Related: Top 50 safest cities in the US

 

 

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Last but not least, Rhode Island saw 26 homes go into foreclosure in April. That nabbed the 8th least populated state as the 30th spot on our list. With 468,335 total housing units, the state’s foreclosure rate was 1 in every 18,013 households. The counties with the most foreclosures per housing unit were (in descending order): Kent, Bristol, Washington, Providence, and Newport.

 

 

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With 481 of a total 8,322,722 housing units in foreclosure, New York’s total number was also in the low triple digits. But with a foreclosure rate of 1 in every 17,303 households, the 4th most populated state holds 29th for foreclosures. The county with the most foreclosures per housing unit was New York County, which is also Manhattan, and the zip codes were (in descending order): 10027 (Morningside Heights), 10035 (East Harlem), 10036 (West Midtown), 10022 (East Midtown), and 10011 (Chelsea).

 

 

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Texas’s total number of foreclosures was only 645. But in a state with the 26th biggest population (and 10,937,026 housing units), that number put it in the 28th spot for foreclosures, making for a foreclosure rate of 1 in every 16,957 households. The counties with the most foreclosures per housing unit were (in descending order): Liberty, Crockett, Atascosa, Jones, and Hidalgo.

 

 

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The 40th most populated state was 27th for foreclosures. Of 542,674 homes, 33 went into foreclosure, making for a foreclosure rate of 1 in every 16,445 households. The counties with the most foreclosures per housing unit were (in descending order):Kauai, Hawaii, Maui, and Honolulu.

 

 

Art Wager

 

Ranked the least populated, Wyoming came in as 26th for foreclosures. With 276,846 housing units and 17 homes in foreclosure, the state’s foreclosure rate was 1 in every 16,285 households. The counties with the most foreclosures per housing unit were (in descending order):Hot Springs, Sublette, Sweetwater, Campbell, and Fremont.

 

Recommended: Home Buying 101: How Much House You Can Afford

 

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In Arizona, the 14th most populated state, there were 195 foreclosures (out of 3,003,286 housing units.) That puts its foreclosure rate at 1 in every 15,401 homes. The counties with the most foreclosures per housing unit were (in descending order):Mohave, Cochise, Yuma, Yavapai, and Maricopa..

 

 

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The 15th most populated state ranks 24th for foreclosures. Of its 2,897,259 housing units, 211 went into foreclosure, making for a foreclosure rate of 1 in every 13,731 homes. The counties with the most foreclosures per housing unit were (in descending order): Franklin, Berkshire, Worcester, Plymouth, and Hampshire.

 

 

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With a total 1,983,949 housing units, Kentucky saw 146 homes go into foreclosure. That puts the foreclosure rate for the 26th most populated state at 1 in every 13,589 households. The counties with the most foreclosures per housing unit were (in descending order): Boyd, Campbell, Hardin, Greenup, and Powell.

 

 

Thomas Kelley

 

Though ranked as the 20th most populated state, Wisconsin’s total 205 foreclosures (out of 2,694,527 total housing units) puts it in 22nd place for most foreclosures. The state’s foreclosure rate is 1 in every 13,144 households. The counties with the most foreclosures per housing unit were (in descending order): Langlade, Richland, Pepin, Jackson, and Washburn.

 

 

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With housing units totaling 1,731,632, Oklahoma saw 132 homes go into foreclosure. As the 28th most populated, the state has a foreclosure rate of 1 in every 13,118 homes. The counties with the most foreclosures per housing unit were (in descending order): Woods, Nowata, Muskogee, Johnston, and Seminole.

 

 

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In the 20th spot for most foreclosures, Pennsylvania ranks as 5th for most populated–and has 5,693,314 homes. A total 435 went into foreclosure in April, making the state’s foreclosure rate 1 in every 13,088 households. The counties with the most foreclosures per housing unit were (in descending order): Luzerne, Delaware, Monroe, Chester, and Dauphin.

 

 

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The 9th most populated state drops one place (from March) to 19th this month. North Carolina has 4,627,089 homes, of which 385 went into foreclosure in April. That means its foreclosure rate was 1 in every 12,018 homes. The counties with the most foreclosures per housing unit were (in descending order): Jones, Hoke, Craven, Bertie, and Onslow.

 

 

” Darwin Brandis”

 

Alaska’s foreclosure rate is 1 in every 11,654 homes. That puts the 3rd least populated state –with a total of 314,670 housing units and 27 homes in foreclosure — in 18th place. The counties with the most foreclosures per housing unit were (in descending order): Kodiak Island, Anchorage, Kenai Peninsula, Fairbanks North Star, and Matanuska-Susitna.

 

 

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Ranked 24th for most populated, Alabama is 17th for foreclosures. Of its 2,255,026 homes, 194 went into foreclosure, making for a foreclosure rate of 1 in every 11,624 homes. The counties with the most foreclosures per housing unit were (in descending order): Macon, Dale, Jefferson, Covington, and Crenshaw.

 

 

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With 131 of its 1,516,629 homes going into foreclosure, Connecticut’s foreclosure rate is 1 in every 11,577 households. In the 29th most populated state, the counties with the most foreclosures per housing unit were (in descending order): Windham, Litchfield, Tolland, New Haven, and New London.

 

 

Ashley_Minkus / istockphoto

 

The 8th most populated state, Georgia is 15th for most foreclosures. Of its 4,283,477 homes, 386 were foreclosed on. That puts the state’s foreclosure rate at 1 in every 11,097 households. The counties with the most foreclosures per housing unit were (in descending order): Polk, Mcduffie, Rockdale, Talbot, and Cook.

 

 

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Of Utah’s 1,087,112 housing units, 99 homes went into foreclosure in April. The 31st most populated state’s foreclosure rate is 1 in every 10,981 households. The counties with the most foreclosures per housing unit were (in descending order): Emery, Duchesne, Wasatch, Tooele, and Salt Lake.

 

Recommended: What Is a Short Sale?

 

AndreyKrav

 

The 30th most populated state has 1,397,087 homes, of which 134 homes went into foreclosure. That makes the state’s foreclosure rate 1 in every 10,426 homes. The counties with the most foreclosures per housing unit were (in descending order): Adams, Wayne, Mills, Montgomery, and Pottawattamie.

 

 

JoeChristensen

 

The 36th most populated state is 12th for foreclosures. Of its 937,920 homes, 91 went into foreclosure, making for a foreclosure rate of 1 in every 10,307 homes. The counties with the most foreclosures per housing unit were (in descending order): Hidalgo, Valencia, Chaves, Cibola, and Sandoval.

 

 

Michael Warren

 

Ranked as 9th least populated state, Maine saw a total 78 foreclosures in April. With a total 742,788 housing units, the state had a foreclosure rate of 1 in every 9,523 homes. The counties with the most foreclosures per housing unit were (in descending order): Washinton, Somerset, Penobscot, Androscoggin, and Oxford.

 

 

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Ranked 1st for most populated state, California is 10th for most foreclosures. It has 14,175,976 housing units, of which 1,540 went into foreclosure—making the state’s foreclosure rate 1 in every 9,205 households. The counties with the most foreclosures per housing unit were (in descending order): Plumas, Trinity, Humboldt, Shasta, and San Bernardino.

 

 

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The 17th largest state by population, Indiana ranks 9th for foreclosures with 1 in every 7,616 homes. Of its 2,886,548 homes, 379 homes were foreclosed on. The counties with the most foreclosures per housing unit were (in descending order): Newton, Blackford, White, Starke, and Delaware.

 

 

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With 1 in every 7,425 homes going into foreclosure, South Carolina is in eighth place. Ranked 23rd for population,South Carolina has 2,286,826 housing units and saw 308 foreclosure filings. The counties with the most foreclosures per housing unit were (in descending order): Bamberg, Edgefield, Dorchester, Marion, and Lee.

 

 

Joesboy

 

Ranked 25th for population, Louisiana had 286 homes out of a total 2,059,918 go into foreclosure. That meant 1 in every 7,203 households went into foreclosure. The counties with the most foreclosures per housing unit were (in descending order): Webster, De Soto, Saint Tammany, Tangipahoa, and Saint Charles.

 

 

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Ranked the 7th most populated, Ohio was 6th with a foreclosure rate of 1 in every 7,195 homes. With a total 5,202,304 housing units in the state, the state had a total of 723 filings. The counties with the most foreclosures per housing unit were (in descending order): Marion, Seneca, Jackson, Cuyahoga, and Defiance.

 

 

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With the 11th largest population in the country, New Jersey is not very far behind Florida with a foreclosure rate of 1 in every 6,390 homes.. Of its total 3,616,614 housing units, 566 went into foreclosure. The counties with the most foreclosures per housing unit were (in descending order): Atlantic, Salem, Ocean, Gloucester, and Morris.

 

Recommended: Tips on Buying a Foreclosed Home

 

JERRYE / Wiki Commons

 

With the 3rd largest population in the country, Florida’s foreclosure rate of 1 in every 6,375 homes puts it in the number four spot. Of its total 9,448,159 housing units, 1,482 went into foreclosure. The counties with the most foreclosures per housing unit were (in descending order): Union, Suwannee, Baker, Putnam, and Holmes.

 

 

DepositPhotos.com

 

The 6th most populated state, Illinois was third for most foreclosures. Of its 5,360,315 homes, 910 went into foreclosure–making the state’s foreclosure rate 1 in every 5,890. The counties with the most foreclosures per housing unit were (in descending order): Massac, Moultrie, Saline, Whiteside, and Livingston.

 

 

IanDikhtiar

 

Ranking 34th for population, Nevada is a close second with a foreclosure rate of 1 in every 5,738 homes. With a total 1,250,893 housing units, the state had 218 foreclosure filings in April. The counties with the most foreclosures per housing unit were (in descending order): Pershing, Nye, Lyon, Carson City, and Elko.

 

 

DepositPhotos.com

 

Though the 6th least populated state in the country, Delaware ranks No. 1 for foreclosures with a foreclosure rate of 1 in every 5,700 homes in April. With a total 433,195 housing units, , the state saw a total 76 foreclosure filings (default notices, scheduled auctions, and bank repossessions). The counties with the most foreclosures per housing unit were (in descending order): Kent, New Castle, Sussex.

 

 

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The Midwest has the smallest presence on our list with just four states. Of the top 30 states, California had the most number of foreclosures (1,540) and Wyoming had the least (17).

 

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