Why are home prices dropping and what housing markets will continue to decline

Since 2019 average rental prices have increased by twenty-five percent or around $345 a month. These are unprecedented increases over such a short period of time, and many are feeling a financial pinch.

Wages have not kept up with these increases and with inflation being felt across food and energy markets as well, consumer purchasing power has diminished.

The top three metro areas that have seen the largest increase in average rent this year were all in Florida: Miami-Fort Lauderdale (+$851), North Port-Sarasota-Bradenton (+$727), and Port St. Lucie (+$706).

The only city that has seen a decrease in rents since January is Youngstown, Ohio.

How will increased interest rates effect the housing market?

As interest rates are pushed by the Federal Reserve some buyers are hopeful that the housing market will cool and that prices will soon come down.

In 2022, a growing share of houses sold were purchased by investment companies rather than individuals. Increasingly, Redfin and CoreLogic, have reported that investors are “buying up moderately priced homes” or single-family homes “either to convert to rental or upgrade for resale.” This year investors are making their presence in the market felt, walking away with twenty eight percent of all properties told in Q1 2022 (January to March) up from “19 percent a year earlier.” Investors creates threats to individual home buyers because they have so much more capital to outbid other buyers who would never be able to make such an offer. However, this could lead to a further deterioration in the number of homeowners in the United States, leaving more to people reliant on the overcrowded and expensive rental market.

However, with interest rates increasing, investors may begin to look at less expensive assets, creating an opening for first time homebuyers and others who had struggled to compete before. Sadly, with a higher interest rate comes a higher mortgage payment and for renters this can mean that their monthly payments are artificially higher.

Redfin, an online real estate platform, conducts a survey asking home sellers about their experience in the market. In July, Redfin found that many sellers had lowered the price of their houses, reversing a major trend in the housing market. Housing has been a seller’s market throughout the pandemic but as interest rates move up and some buyers exit the market – tides are turning.

Cities where sellers decreased prices by the highest amout included,