Mansion Global host Katrina Campins discusses the state of the housing market on Making Money.
There has been a relentless rise in US home prices over the past three years, but a growing number of markets face the risk of a major price correction.
A new report released by Parcl Labs, a real estate analytics and data firm, shows that there are 15 U.S. housing markets that are “at risk” of a home price correction in the coming fall and winter months. .
“While there is no guarantee that these regional markets will experience a material house price correction, they are showing signs of softening,” the report said. “At the very least, buyers in these markets have more leverage than they did a few years ago.
US HOUSING MARKET IS ‘OVERGROWN’ AND COULD REMAIN SO THROUGH 2026
A home for sale in the Aqualane Shores neighborhood of Naples, Florida on Tuesday, February 13, 2024. (Photo: Lisette Morales McCabe/Bloomberg via Getty Images / Getty Images)
These are the 15 markets with the highest risk of a correction, according to Parcl Labs.
- Crestview-Fort Walton Beach-Destin, Florida
- Daphne-Fairhope-Foley, Alabama
- Deltona-Daytona Beach-Ormond Beach, Florida
- Gainesville, Florida
- Homosassa Springs, Florida
- Lakeland-Winter Haven, Florida
- Miami-Fort Lauderdale-Pompano Beach, Florida
- Myrtle Beach-Conway-North Myrtle Beach, South Carolina
- Naples-Marco Island, Florida
- Ocala, Florida
- Orlando-Kissimmee-Sanford, Florida
- Palm Bay-Melbourne-Titusville, Florida
- Port St. Lucie, Florida
- Sebastian-Vero Beach, Florida
- Tampa-St. Petersburg-Clearwater, Florida
The most notable part of the list is that 13 of the 15 “at risk” housing markets are all located in Florida.
Mortgage calculator: SEE HOW MUCH HIGHER THEY COULD COST
Florida’s active housing inventory has grown at an “accelerated” rate over the past year. Part of that growth is due to Hurricane Ian, which made landfall on Florida’s Gulf Coast in September 2022 and helped fuel a housing supply crunch that was eventually offset by new listings.
Water houses near Naples Pier in Naples, Florida on Tuesday, February 13, 2024. (Photo: Lisette Morales McCabe/Bloomberg via Getty Images / Getty Images)
Florida is also battling an increase in home insurance premiums, which has further exacerbated affordability concerns. Researchers have blamed rising insurance prices for several issues, including weather disasters, rising reinsurance rates and major home repairs, as inflation pushes the cost of building materials higher. Additionally, a growing number of insurance companies in the Sunshine State are either going out of business or raising their rates.
Finally, a new state law passed after the Surfside Condo collapse in 2021 has put “downward pressure” on many older condos along Florida’s coastline. The law requires inspections of all condominium and cooperative buildings that are three stories or higher. If there is a problem with the structure, a structural integrity reserve study should be performed.
HOUSING AFFORDABILITY IS AT LOWEST LEVEL SINCE 2007
“This growing weakness in prices, particularly in high-performing markets like Tampa and Miami, could signal the early stages of a market correction in the region,” said Jason Lewris, co-founder of Parcl Labs.
There are a number of driving forces behind the nationwide affordability crisis.
Years of no construction fueled the country’s housing shortage, a problem that was later exacerbated by rapidly rising mortgage rates and expensive building materials.
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High mortgage rates over the past three years have created a “golden handcuff” effect on the housing market. Sellers who locked in a record low mortgage rate of 3% or less during the start of the pandemic have been reluctant to sell, further limiting supply and leaving few options for eager potential buyers.
Economists predict that mortgage rates will remain high for most of 2024 and that they will only begin to fall when Federal Reserve starts lowering rates. Even then, rates are unlikely to return to the lows seen during the pandemic.