A recent report from the research team at Zillow showed that several major cities in California are experiencing a measurable decline in home prices. But much of the country seems to be doing okay right now, in terms of home price stability. This contradicts earlier (and gloomier) forecasts that predicted a major correction or even a crash in home prices across the U.S.
Home Prices Holding Ground in Most U.S. Cities
On March 24, researchers from Zillow published their latest housing market update with data relating to home sales, prices, and other real estate metrics. Among other things, this report showed that home prices across much of the U.S. are still holding steady as of spring 2023.
While price growth has clearly slowed over the past year, we’re not seeing anything resembling a real estate market crash type of scenario. In fact, house values have edged upward over the past year in many U.S. cities.
To quote the March 2023 Zillow report:
“The typical U.S. home value climbed slightly from January to February (0.1%). Home values are 4.4% higher than one year ago but 3.3% lower than their peak last July.”
Over the past few months, some forecasters predicted that we would see a major decline in house values in cities across the U.S. They viewed this as a kind of housing market reversal or “correction,” following the unprecedented price growth of 2020 and 2021.
But we haven’t seen that kind of dramatic reversal — at least not in a national sense. This latest report did reveal a decline in prices for 13 of the 50 largest metro areas in the country, when measured year-over-year. But in the rest of those metros, which represent the majority, house values either held steady or increased over the past year.
A Modest Price Forecast for the Rest of 2023
Some real estate markets across the country went bananas during the early days of the pandemic. Austin, Texas and Boise, Idaho are the two widely cited examples. These and other pandemic “boomtowns” experienced an unprecedented level of sales activity and price growth.
Now, these formerly red-hot markets are cooling faster than the rest of the country.
We will get to those anomalies in just a moment. But as for most of the U.S., the housing market is surprisingly stable right now, with house values more or less holding their ground.
Just don’t expect much in the way of price growth over the next year or so. Zillow’s latest forecast predicted that the median home value for the U.S. would rise by a meager 0.5% during 2023 (compared to a gain of 4.4% over the past 12 months).
Economically, this rapid deceleration in price growth is actually a good thing. During the past three years, home prices in the U.S. outpaced wage growth by a huge margin. This in turn reduced housing affordability and put homeownership out of reach for millions of Americans. So we are long overdue for a cooling trend when it comes to home prices.
California, Austin Housing Markets a Different Story
This latest report also revealed a trend we’ve been covering over the past few weeks. Some of the formerly red-hot housing markets are currently experiencing a major cooldown. Many of these real estate markets are located in California — with Austin, Texas thrown in to complete the list of anomalies.
Interestingly, the housing markets that are experiencing significant home price declines in 2023 all happen to be located in tech-centric metro areas.
According to Zillow, the U.S. metros that experienced the biggest year-over-year drop in home prices over the past year were: San Francisco (-7.7%), San Jose (-6.1%), Sacramento (-4.5%), Austin (-4.3%), and Seattle (-3.9%).
Real estate markets like Sacramento, San Jose, and Austin are currently getting the real estate version of a reality check. While no one can predict future housing trends with accuracy, it seems likkayely that these declining markets have further to fall before finding a “new normal.”
Related report: Austin housing market reversal
We know by looking at historical data that skyrocketing home values are usually short-lived, and that they typically precede a period of correction during which prices drop. We also know that house values in the U.S. tend to rise at a more-or-less steady pace, despite the occasional anomaly.
So even in places like Austin, San Francisco and Seattle — which are currently in a state of decline — house values will eventually stabilize, level off, and begin to climb again.
So, Is 2023 a Good Time to Buy a Home?
With all of these real estate market changes in the air, a lot of would-be home buyers are currently wondering the same thing. Is 2023 a good time to buy a home? Or would it be better to take a wait-and-see approach for the time being?
The answer to this question will largely depend on two things: (1) where you’re planning to buy a home, and (2) how long you’re planning to stay in it.
As we’ve just seen, there are many cities across the country where home prices are currently falling. If I was a home buyer in a real estate market like Austin, Seattle or Sacramento, I’d probably put my purchasing plans on hold for now. I would want to see how much further prices have to fall, before the market finds a new “bottom.”
But in other real estate markets, where home values appear to be holding steadily and show no imminent signs of decline, 2023 might be a great time to buy a home. In fact, the real estate market is starting to shift in favor of buyers, when it comes to negotiating.
This underscores the importance of conducting in-depth and localized research, before entering the housing market. Conditions can vary greatly from one city or metro area to the next. Home buyers need to find out what’s going on in their own backyard, before making a purchase.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author