For months, I, along with many prominent housing market analysts, have been forecasting a big shift in the housing market at some point in 2022.\u00a0<\/span><\/p>\n For most of the last two years, we\u2019ve been in an unbalanced housing market that strongly favors sellers. Bidding wars, offers over asking, and waived contingencies have become the norm. But as interest rates rise, affordability declines, and fears of a recession loom, buyers are gaining back some power in the housing market.\u00a0<\/span><\/p>\n As the dynamics of the market change, appreciation rates should cool dramatically and become flat or even negative. But real estate is local, and I believe the most likely scenario over the coming months is that some markets will decline while others will continue to grow, albeit at a far more modest pace than over the last several years.\u00a0<\/span><\/p>\n The question then becomes, which markets are at risk of decline, and which will see prices stay steady or even grow? In this article, I will explore data to determine the short-term strength of individual housing markets in the U.S. to help you identify opportunities and make informed investing decisions.<\/span><\/p>\n Below you\u2019ll find a complete analysis and a downloadable city-level spreadsheet.\u00a0<\/span><\/p>\n Before we get into the localized data, let\u2019s look at June\u2019s housing market data on the national level as it helps provide context for the regional differences.\u00a0<\/span><\/p>\n First and foremost, things haven\u2019t changed too much in terms of prices and appreciation rates just yet. The\u00a0<\/span>median home price<\/span><\/a>\u00a0for the week ending July 3 was still up about 12.5% year-over-year. That\u2019s down from last summer\u2019s peak when appreciation rates were around 20%, but this level of growth would be unprecedented in any pre-pandemic period.\u00a0<\/span><\/p>\n Although prices haven\u2019t come down on a national level just yet, it is worth noting that price drops are up almost 4% YoY and are much higher than at any point since at least 2019.\u00a0<\/span><\/p>\n A quick note on price drops:<\/span><\/strong>\u00a0They\u2019re worth tracking, but I don\u2019t put much weight on this data point. Price drops often reflect the behavior of overzealous sellers rather than a lack of demand. Following two years of unprecedented seller power, I\u2019d expect an increase in price drops in almost every market\u2014even the strong ones. Huge increases in price drops worry me (Austin, TX has seen a nearly 500% increase in price drops YoY), but seeing double-digit increases doesn\u2019t concern me as much.\u00a0<\/span><\/p>\n That being said, price drops can be a lead indicator for shifts in the market but should be considered alongside other indicators.\u00a0<\/span><\/p>\n As I\u2019ve written before, the main trend shifts that need to occur for housing prices to moderate or decline is that both active listings and days on market (DOM) need to increase.\u00a0<\/span>You can read all about why I believe this here<\/span><\/a>, but in short, active listings and days on market are good measurements of the balance between supply and demand in the housing market. When inventory and DOM are low, it\u2019s a seller\u2019s market, and prices generally rise. When inventory and DOM rise, buyers gain power, and prices flatten or decline.\u00a0<\/span><\/p>\n As you can see in this\u00a0<\/span>chart provided by Realtor.com<\/span><\/a>, active listings are starting to tick up nationally and are up about 19% over June 2021. To be clear, active listings are still dramatically below where they were pre-pandemic. Still, we\u2019re no longer in the declining inventory (on a year-over-year basis) era that lasted from April 2020 to May 2022.\u00a0<\/span><\/p>\n June 2022 was the first month we\u2019ve seen year-over-year gains in active listings for more than two years.\u00a0<\/span><\/p>\n On the other hand, days on market (DOM) is still near all-time lows and is about half of what it was in 2019. This means at a national level, there is still strong demand for housing. If demand had evaporated, listings would be sitting on the market longer, but they\u2019re not.\u00a0<\/span><\/p>\n Note that in both of these charts, some of the recent increases are due to seasonality. You\u2019ll notice that active listings and DOM typically rise over the summer and decline in the winter, and you need to account for that. We\u2019re looking for when DOM sees year-over-year gains, which hasn\u2019t happened yet.\u00a0<\/span><\/p>\n All told, on the national level, the housing market seems like it\u2019s starting to shift, but modestly. DOM is still low, signaling sufficient demand, leading to prices remaining up a whopping 12.5% year-over-year. For prices to moderate or decline, DOM and active listings need to get much closer to pre-pandemic levels, and we\u2019re not even close to that yet.\u00a0<\/span><\/p>\n So, why then do I believe the housing correction has started? When you look at the data for individual housing markets, it tells a much more nuanced story.\u00a0<\/span><\/p>\n As is often said in this industry, real estate is local. Recent housing market data makes that very apparent.\u00a0<\/span><\/p>\n To showcase the differences, let\u2019s look at a few of the recent boom\u2019s biggest winners: Boise, ID, and Asheville, NC.\u00a0<\/span><\/p>\n Boise was perhaps the hottest housing market over the last several years, with prices increasing 59% from June 2019 to June 2022. Those are incredible gains, but to me, Boise is at risk of losing a small amount of those gains.\u00a0<\/span><\/p>\n Remember, my hypothesis is that markets where active listings and days on market are near pre-pandemic levels are at the greatest risk of a correction. For Boise, not only have active listings risen 130% year-over-year, they are actually 8% above pre-pandemic levels (which I measure as June 2019 compared to June 2022)! There are only a handful of markets where this is true, and Boise is the most notable.\u00a0<\/span><\/p>\n DOM is up 4% year-over-year but is still down 13% from before the pandemic. But if you combine those two data points with a big increase in new listings and huge increases in price drops, this looks like a housing market in transition to me.\u00a0<\/span><\/p>\n Does this mean that Boise will see a crash in prices? No. That could happen, but I think the more likely scenario is a balanced market where buyers actually have some power. This is just an informed guess, but I do expect we\u2019ll see price declines in Boise at some point in the coming year or so, but probably only single-digit declines. What\u2019s more certain to me is that buyers will be able to negotiate, and better deals will emerge in markets like Boise.\u00a0<\/span><\/p>\n To contrast Boise, let\u2019s look at another recent boom town, Asheville, North Carolina.\u00a0<\/span><\/p>\n Asheville\u2019s appreciation since 2019 was 41% (more modest than Boise but still enormous) and has been up nearly 20% in just the past year.\u00a0<\/span><\/p>\nThe Big Picture\u00a0<\/span><\/h2>\n
![\"active](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/Active-Listings-June.png\" "\\"The")
<\/source><\/source><\/picture>![\"days](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/07\/DOM-June.png\" "\\"The")
<\/source><\/source><\/picture>Regional Housing Markets\u00a0<\/span><\/h2>\n
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\n \nBoise, Idaho<\/th>\n Median List Price<\/th>\n Active Listings<\/th>\n New Listings<\/th>\n Days on Market<\/th>\n Price Drops<\/th>\n<\/tr>\n<\/thead>\n \n June 2019 \u2013 June 2022<\/td>\n 59%<\/td>\n 8%<\/td>\n 40%<\/td>\n -13%<\/td>\n 86%<\/td>\n<\/tr>\n \n Year-over-Year<\/td>\n 10%<\/td>\n 130%<\/td>\n 20%<\/td>\n 4%<\/td>\n 182%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n
![\"Fundrise](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-1024x252.png\" "\\"The"){kind=logo}
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