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Update: The home price correction in America’s 400 largest housing markets, as told by one interactive map

November 15, 2022, 1:54 PM UTC

Back in July, Redfin paid $610,000 for this two-bedroom single-family home in Las Vegas. Just weeks later, Redfin put it back on the market with a $674,900 price tag. However, it was too late: Las Vegas was already slipping into a home price correction. Fast-forward to November, and the property remains unsold with a $499,900 list price—or 18% below its purchase price.

That type of looming loss explains why Redfin recently announced it’s shutting down its algorithm-run iBuyer business. As long as the U.S. housing market remains in correction mode, the math just doesn’t make sense.

“When the shiitake mushrooms hit the fan, you [investors] want to get out first. The way to do that is to figure out where the lowest sale is, and be 2% below that. And if it doesn’t sell in the first weekend, move it [the price] down [again],” Redfin CEO Glenn Kelman recently told Fortune.

While flippers and homebuilders are scrambling to move inventory in markets like Las Vegas—where home values are down 6.93% since its 2022 peak—that’s not the story (at least yet) in every market. A lot of markets are still sitting at their 2022 peak. Simply put: The “shiitake mushrooms” have yet to hit “the fan” in every market.

To better understand the ongoing housing correction, Fortune reviewed the latest Zillow Home Value Index (ZHVI) data.

Among the country's 400 biggest housing markets, 219 have seen home values fall off their 2022 peak. The average decline being 2%.

While the home price correction has certainly gone national, it continues to hit two types of markets harder than others.

The first group being "significantly overvalued" housing markets. These are often either second-home markets or boomtowns that saw home prices during the boom soar far beyond what local incomes can support.

Look no further than Austin, which Moody's Analytics deemed in the second quarter as being "overvalued" by 61.1%. That level of froth might explain why Austin has already seen home values fall 10.21% from its 2022 peak. Not too far behind Austin are other "significantly overvalued" markets like Reno (where home values are down 8.47%), Boise (-7.06%), and Salt Lake City (-6.89%).

The second group comprises high-cost markets along the West Coast. Places like San Francisco (where home values are down 8.18%), Santa Cruz (-7.58%), and Seattle (-6.28%). According to John Burns Real Estate Consulting, those markets are hyper mortgage rate sensitive. In many cases, they're hit by a double whammy: Not only are their high-end real estate markets more rate-sensitive, but so are their tech sectors.

While 219 major markets are down from their 2022 peak price, another 181 markets remain at their 2022 peak price. The ongoing mortgage rate shock has yet to see home values, as measured by Zillow, fall in markets like Philadelphia, Baltimore, Virginia Beach, Oklahoma City, and Richmond.

But that doesn't mean the home price correction won't hit markets like Virginia Beach and Philadelphia. If mortgage rates remain elevated and unsold inventory—which nationally remains tight—continues to build, it could apply further downward pressure on home prices.

That's exactly what Moody's Analytics expects to happen.

While Moody's doesn't expect a 2000s-style housing crash (which saw U.S. home prices fall 27% from peak to trough), it does expect U.S. home prices to fall around 10% from peak to trough. That includes drops of 14.2% and 5.3%, respectively, in markets like Virginia Beach and Philadelphia. (Here's the Moody's outlook for the nation's 322 largest markets.)

On one hand, some of these 2022 home price corrections are fairly big. On the other hand, most of these markets are still up big-time since the onset of the Pandemic Housing Boom.

Between March 2020 and May 2022, Austin saw its home values soar 75.36%. Since, it has taken a -10.21% haircut. That pulls Austin's pandemic home value gains down to 57.46%.

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