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David Ryder | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
After staggering growth during the pandemic, the U.S. housing market is starting to cool \u2014 and it’s happening fastest along the West Coast.<\/p>\n
The quickest-cooling real estate market is San Jose, California, according to a new Redfin analysis<\/a>, which ranked U.S. metropolitan markets based on median sales prices, year-over-year inventory changes and other factors between February and May 2022. \u00a0<\/p>\n Six of the top 10 markets are in California, including three in the Bay Area, with four other Western cities rounding out the list.\u00a0<\/p>\n More from Personal Finance:<\/strong> By comparison, Albany, New York, was the slowest-cooling housing market, followed by El Paso, Texas, and Bridgeport, Connecticut, Redfin’s analysis found.<\/p>\n 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.<\/p>\n 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.<\/p>\n 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.<\/p>\n<\/div>\n Here are the U.S. markets that have cooled the most over the past year, according to Redfin, and their median sale price as of May 2022.<\/p>\n Here are the U.S. markets that have been slowest to cool over the past year, according to Redfin, and their median sale price as of May 2022.<\/p>\n While growth may be slowing in some markets, experts still aren’t expecting significant price drops in most markets.<\/p>\n “One of the reasons why we’ve had this frothy, overheated market is just lack of inventory,” Cohn said.<\/p>\n To that point, in Redfin’s analysis, some of the faster-cooling markets have seen more inventory<\/a> come on the market. In Seattle, for example, inventory is up 40.9% from the prior year.<\/p>\n Home prices are still rising, albeit more slowly<\/a>. 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<\/a>.\u00a0<\/p>\n “The velocity of price increases will certainly diminish significantly,” Cohn said, predicting a “healthy normalization” of the real estate market.<\/p>\n<\/div>\n One of the reasons why we’ve had this frothy, overheated market is just lack of inventory.<\/p>\n Melissa Cohn<\/p>\n regional vice president at William Raveis Mortgage<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n With many buyers paying cash over the past couple of years, some purchasers have waived appraisals, inspections or even seeing the home in person<\/a>.<\/p>\n However, the market shift may offer buyers more time to see properties, make an offer and purchase the right home, Cohn said.<\/p>\n<\/div>\n If you recently purchased a home, you may have concerns about the home’s future value, especially in a cooling market.\u00a0<\/p>\n “The good news is that these buyers most likely got locked into a lower interest rate, so the payments should be more manageable than someone buying now,” said Matthew Chancey, a certified financial planner with CoastalOne in Tampa, Florida.<\/p>\n If you overbid on the property, you may be “underwater” in the short term, meaning you owe more on the mortgage than the home is worth, he said.<\/p>\n That’s not a situation you necessarily need to rush to remedy. Kyle Newell, an Orlando, Florida-based CFP and owner of Newell Wealth Management, said homeowners who are underwater should funnel extra cash into savings<\/a> for emergencies, such as a possible job loss, rather than racing to pay down the mortgage.<\/p>\n Experts generally recommend setting aside three to six months of living expenses. But some advisors suggest more for added flexibility.<\/p>\n<\/div>\n<\/div>\n
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10 slowest-cooling U.S. housing markets<\/h2>\n
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‘Cooling’ doesn’t mean buyers will see price drops<\/h2>\n
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What cooling markets mean for homeowners<\/h2>\n