10 U.S. real estate markets that are cooling the fastest

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After staggering growth during the pandemic, the U.S. housing market is starting to cool — and it’s happening fastest along the West Coast.

The quickest-cooling real estate market is San Jose, California, according to a new Redfin analysis, which ranked U.S. metropolitan markets based on median sales prices, year-over-year inventory changes and other factors between February and May 2022.  

Six of the top 10 markets are in California, including three in the Bay Area, with four other Western cities rounding out the list. 

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By comparison, Albany, New York, was the slowest-cooling housing market, followed by El Paso, Texas, and Bridgeport, Connecticut, Redfin’s analysis found.

One of the top reasons for cooling throughout the country is rising interest rates, which have triggered “the affordability factor,” said Melissa Cohn, regional vice president at William Raveis Mortgage.

Indeed, costlier areas, such as Northern California, where homes may easily sell for $1 million to $1.5 million or higher, have been harder hit by 30-year fixed mortgage rates approaching 6%, the report found.

For example, if you’re buying a million-dollar home with a 20% down payment, your monthly mortgage payment may be roughly $5,750 with a 6% interest rate, depending on taxes and homeowner’s insurance, which is $1,400 higher than with a 3% interest rate, according to the report.

10 fastest-cooling U.S. housing markets

10 slowest-cooling U.S. housing markets

‘Cooling’ doesn’t mean buyers will see price drops

While growth may be slowing in some markets, experts still aren’t expecting significant price drops in most markets.

“One of the reasons why we’ve had this frothy, overheated market is just lack of inventory,” Cohn said.

To that point, in Redfin’s analysis, some of the faster-cooling markets have seen more inventory come on the market. In Seattle, for example, inventory is up 40.9% from the prior year.

Home prices are still rising, albeit more slowly. The expectations for one-year median home price growth dropped to 4.4% from 5.8% in June, according to the Federal Reserve Bank of New York’s Survey of Consumer Expectations

“The velocity of price increases will certainly diminish significantly,” Cohn said, predicting a “healthy normalization” of the real estate market.

One of the reasons why we’ve had this frothy, overheated market is just lack of inventory.

Melissa Cohn

regional vice president at William Raveis Mortgage

With many buyers paying cash over the past couple of years, some purchasers have waived appraisals, inspections or even seeing the home in person.

However, the market shift may offer buyers more time to see properties, make an offer and purchase the right home, Cohn said.

What cooling markets mean for homeowners

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