10 Housing Markets experiencing the greatest surge – and 10 encountering the steepest decline

**Title: The Divided Housing Market: Understanding Regional Variations in Home Prices**

**The Impact of Mortgage Rate Surge on Home Prices**

The cost of mortgage borrowing in the United States has seen a significant increase since January 2022, with the average 30-year fixed mortgage rate rising from a 3-handle to a 7-handle. However, the effects of this rate shock have not been uniform across the country. While some regions have experienced a decline in home prices comparable to the 2009 housing crisis, others have continued to see price increases.

**Regional Disparities: Winners and Losers**

According to the Freddie Mac House Price Index, 77 out of the nation’s 100 largest housing markets saw an increase in prices between June 2022 and June 2023, while 23 markets experienced a decline. The top 10 markets with the highest price increases are concentrated mainly east of the Rockies, including McAllen, Texas (+11.8%) and Knoxville, Tenn. (+8.3%). On the other hand, the 10 markets with the most significant declines are predominantly located in the Western region, Texas, and Hawaii, such as Boise City, Idaho (-10.5%) and Austin, Texas (-10.2%).

**Factors Influencing the Divide**

Why has the housing market shown such divergence over the past year? The answer lies in the sensitivity of certain housing markets to interest rates, particularly in the Western region. Cities like San Francisco and Denver, which have a high concentration of rate-sensitive industries like the tech sector, are more susceptible to fluctuations in prices triggered by mortgage rate shocks. Moreover, the elevated home prices in these regions, relative to local rents and incomes, make them more vulnerable to corrections in prices.

These frothy home prices in the West were a result of a decade-long housing shortage and a simultaneous tech boom that boosted the performance of Western markets compared to their Eastern counterparts from 2012 to 2021. On the other hand, the Eastern half of the country had less skewed fundamentals with more affordable house price-to-rent ratios and fewer rate-sensitive industries. This provided a cushion, preventing significant declines in the housing market during the correction in 2022.

**Current Trends and Forecasts**

While 23 of the nation’s 100 largest housing markets have experienced year-over-year declines, only three markets saw a decline between May 2023 and June 2023. In fact, 97 markets witnessed a month-over-month increase in home prices during that period. The lack of existing inventory in the first half of 2023 served as a tailwind, compensating for the impact of reduced housing affordability.

Experts’ opinions vary regarding whether home prices have bottomed out. The AEI Housing Center, CoreLogic, and Zillow believe that national house prices have hit their bottom. However, Moody’s Analytics and Morgan Stanley predict further price decreases as the housing market transitions from the seasonally strong window (first half of the year) to the seasonally weaker window (second half of the year).

Freddie Mac’s latest forecast model predicts a 2.9% decline in U.S. house prices for this year and a 1.3% decline in 2024. However, even Freddie Mac economists express uncertainty about their own model, noting that the tight inventory may push sales volume down, keeping home prices up.


The variation in home prices across the country demonstrates the unique characteristics of different housing markets. While some regions have been more resilient to mortgage rate shocks and continue to experience price increases, others have faced greater challenges due to their sensitivity to interest rates. Understanding these factors can provide valuable insights for both buyers and sellers in navigating the current housing market.

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