Pandemic hotspots, where home prices shot up thanks to out-of-towners with deep pockets fleeing more expensive locales, are now seeing prices rapidly decline, according to a Redfin report released today.

Home-price growth has slowed most markedly in the fastest-growing pandemic boomtowns, including Austin, Texas, Phoenix and Boise, Idaho, “as high mortgage rates and the uncertainty of the economy deter would-be buyers,” the Seattle-based real estate brokerage reported.

Both Austin and Phoenix experienced 23% price drops between February and October—the most dramatic among the 99 most populous U.S. metros. “We compared October to February because in many U.S. metros, that’s when the housing market was near its peak in terms of demand and competition,” Redfin said.

“The forces slowing the housing market, such as high mortgage rates, are having an outsized impact on places like Austin and Boise that saw home prices skyrocket over the last few years,” Redfin Senior Economist Sheharyar Bokhari said.

The findings follow news last week that investor purchases of single-family houses plunged 32% in the third quarter, Redfin found. Except for the onset of the pandemic in early 2020, this was the steepest percentage plunge since the housing bust beginning in 2008, the firm reported.

“Home prices can only rise by double digits for so long before the growth becomes unsustainable,” Bokhari said. “High rates and stumbling tech stocks are making it unsustainable quite quickly, especially in destinations popular with tech workers. Plus, many of the out-of-towners with big budgets who wanted to move into those places already have.”

Austin’s median price-per-square foot fell to just over 1% growth in October. But that’s a dramatic decrease from the 24% price growth year over year the boomtown was experiencing in February, when mortgage rates were still hovering under 4%, Redfin said.

In Phoenix, the second-hottest real estate market during the pandemic, price per square foot was up 6% from a year ago, but down from nearly 29% in February.

Las Vegas experienced a 21% drop in price growth per square foot, followed by Boise, and Oakland and Sacramento, Calif., where prices fell 20% between February and October.

Phoenix, Austin and Las Vegas were all among the metros that gained the most new residents in 2021, and Phoenix, Las Vegas and Sacramento all consistently rank on Redfin’s list of most popular destinations for homebuyers moving in from out of town, the firm reported.

“Boise and its suburbs have been among the fastest-growing cities in the U.S. over the last few years, attracting many new residents from California. Out-of-towners with big budgets helped drive up home prices in those popular destinations in 2021 and 2022. Home prices have increased more than 30% over the last two years in Phoenix, Austin and Boise, with the typical home now selling for nearly $500,000 in all three,” Redfin said.

First « 1 2 » Next