The rate at which the U.S. real estate market is cooling: what buyers need to know

After a stunning rise during the pandemic, the U.S. real estate market has begun to cool, and it's happening fastest on the West Coast. The fastest cooling real estate market is San Jose, California, according to a Redfin analysis that ranks U.S. cities based on median sales price, year-to-date inventory change and other factors from February through May 2022.

Six of the ten fastest cooling markets are in California

Including three in the Bay Area, the remaining four West Coast cities close out the list. While the slowest cooling real estate market is in Albany, New York, followed by the cities of El Paso, Texas and Bridgeport, Connecticut, the Redfin analysis found.

One of the main reasons for the nationwide cooling is rising interest rates caused by the "affordability factor," said Melissa Cohen, regional vice president at William Raveis Mortgage.

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Indeed, more expensive areas like Northern California, where homes can easily sell for $1 million to $1.5 million or more, have been hit hardest by increases in 30-year fixed mortgage rates approaching 6%, the report showed.

For example, if you buy a million-dollar home with a 20% down payment, your monthly mortgage payment could be about $5,750 at an interest rate of 6%, depending on taxes and property insurance, which is $1,400 more than at an interest rate of 3%, according to the report.

While growth may be slowing in some markets, experts still don't expect prices to drop significantly in most markets. "One of the reasons we've had this overheated market is precisely the lack of supply," Cohen said.

According to Redfin's analysis, some of the faster-cooling markets have become more saturated. For example, Seattle's inventory of goods is up 40.9% year-over-year. Home prices still continue to rise, albeit at a slower pace. Forecasts for year-over-year growth in median home prices fell to 4.4 percent from 5.8 percent in June, according to the Federal Reserve Bank of New York's Survey of Consumer Expectations. "The rate of price appreciation will certainly slow down significantly," Cohen said, predicting a "healthy normalization" of the real estate market.

Context at link: https://www.cnbc.com/2022/07/20/the-10-fastest-cooling-and-slowest-cooling-housing-markets-in-the-us.html