Home Prices Are Falling in These Cities—While They’re Rising Just About Everywhere Else
Everyone by now has some familiarity with America’s daunting pandemic-era real estate math: Take an all-consuming demand for new homes and bigger spaces, add in low mortgage rates and historically paltry inventory levels, and it all equals home prices that are skyrocketing to unheard of heights. And it seems to be happening just about everywhere.
Nationally, home prices are up in just about every nook and cranny of the country, rising 15% year over year to a median $356,000 in January, according to realtor.com® list price data. It’s enough to make would-be homeowners give up and consign themselves to a lifetime of renting. But wait! The realtor.com data team discovered a few places where home prices are actually falling, where buyers may get a bit of a break.
The six places we found with prices heaving south instead of north have a very specific mix of factors. Most are cities with a heavy reliance on tourism or college sports—areas that have been slammed by COVID-19 travel restrictions. They generally have struggling local economies. Price-boosting bidding wars have been less prevalent.
“A lot of folks [in these markets] who have the luxury of waiting are going to hold off until the school year is over to list their homes,” explains George Ratiu, senior economist at realtor.com. “That’s [affecting] the winter inventory mix. Given that we’re in the middle of winter, a lot of the homes coming on the market may be lower-priced homes.”
The lack of revenue and other pandemic effects on some of these local economies have led to widespread layoffs. And those without steady jobs are less likely to be comfortable purchasing a home, let alone be approved for a loan.
On the flip side, with more companies allowing their employees to work from home, these metros could be a good option for bargain hunters who can work from anywhere.
To figure out where home prices have dipped, the realtor.com data team looked at median list prices in the nation’s 250 largest metropolitan areas. We compared average list prices on realtor.com in November, December, and January compared with the same three months a year ago. We also filtered out metros where the price per square foot had risen over that same time frame. (Metros include the main city and surrounding suburbs, towns, and smaller urban areas.)
OK, bargain hunters, here’s your chance! Here are the places where homes are actually getting cheaper. (At least by a bit.)
1. Destin, FL
Median list price: $469,000
Median list price change: -15.6%
Located on the Florida Panhandle about 2.5 hours west of Tallahassee, Destin was hit hard by Hurricane Sally in September, with the storm causing massive flooding and beach erosion. Prior to that, Florida’s Department of Environmental Protection had already designated parts of the coastline “critically eroded” following other severe storms in the area.
The entire state also reported a significant drop in tourism last year, according to Visit Florida, the state’s official tourism marketing corporation, largely due to the pandemic. That’s all hurt the local housing market.
The Destin area has seen an increase in offseason tourism as parents and children are able to work and go to school remotely, according to Jacqui Luberto with Realty ONE Group Emerald Coast. Local buyers are flooding the market, but they’re looking for cheaper, single-family homes under $300,000. Competition for those homes is fierce, and they’re going quickly.
However, the market is saturated with condos, which is likely helping to drag median prices down. On the other end of the spectrum are the $1 million-plus homes that aren’t selling.
“We have more mansions than affordable housing,” says Luberto.
2. Honolulu, HI
Median list price: $975,000
Median list price change: -12.2%
Hawaii is synonymous with tourism, which hasn’t exactly been a good thing over the past year. In December, visitors entering the state plunged 75% compared with the same time a year ago, according to preliminary data from the Hawaii Tourism Authority. That drop has led to massive job losses in the leisure and hospitality sector. In the Honolulu area, unemployment has reached 8.1%—well above the national rate of 6.7%.
Many of the buyers who can afford Hawaii’s high prices come from the U.S. mainland or overseas, predominantly from Japan. With the pandemic restrictions, they had a harder time seeing the properties in person, leading to the decline in prices.
But folks shouldn’t count the Aloha state out just yet. Low mortgage rates and the desire for more space, along with the appeal of living in paradise, are still driving demand for single-family homes, says local real estate broker George Krischke, of Hawaii Living.
“Many of the buyers from the U.S. mainland are either remote workers or retiring/relocating to Hawaii because of the perceived safe, COVID-free environment,” Krischke says. “Plus, you can’t beat our balmy tropical weather.”
3. Bloomington, IL
Median list price: $117,000
Median list price change: -8.3%
Located in Central Illinois, Bloomington allows relatively quick access to major cities like Chicago, St. Louis, and Indianapolis. But a struggling economy and a statewide exodus, partly due to rising taxes, have hurt Bloomington’s housing market.
Recent layoffs at Bloomington-area manufacturing companies, restaurants, and Illinois State University means there are fewer people in the workforce. Average wages dropped as well, according to the Bloomington Normal Economic Development Council. So people aren’t taking home as much in their paychecks as they were pre-pandemic.
Then add in that Illinois recorded the second-worst population drop in the nation last year, behind New York, according to U.S. Census Bureau data released in December. All of this hurts local real estate prices.
4. Erie, PA
Median list price: $139,500
Median list price change: -3%
Erie has also experienced population declines in recent years, with retirees and young people alike looking to move South for better weather. Erie is known as the snowiest town in Pennsylvania, averaging 100 inches of snowfall per year, thanks to its location on Lake Erie.
The local economy also took a hit in 2020 with job losses in the manufacturing and leisure and hospitality industries, which caused the area unemployment rate to rise to 7.8% in December.
Still, low inventory in recent months has prevented even deeper price drops. Many of the local buyers working with Jennifer Purpura of Coldwall Banker Select Realtors are mostly relocating to work at one of the area’s health care facilities, or families looking for a home where they can bring their older relatives.
5. Shreveport, LA
Median list price: $512,000
Median list price change: -2.6%
Shreveport is the second-largest tourist destination in Louisiana, behind New Orleans. A drop in visitors due to COVID-19 means area hotels and casinos have been among the local businesses laying off employees in the wake of the pandemic. That’s making it more difficult for locals to be able to come up with a down payment for a home, build up their credit score, or get approved for a mortgage.
High crime rates in Shreveport proper have also hindered demand—a rep hardly helped by the 2017 launch of Investigative Discovery’s “Murder Chose Me,” a show that followed a homicide detective from the area.
Still, like the rest of the United States, inventory here is tight. Michael Villalpando with Berkshire Hathaway HomeServices Ally Real Estate in Shreveport says the area usually has around 3,000 homes on the market at a given time. Last week, it had 162.
“People are unsure about their jobs, unsure about their future. … They’re a tad bit afraid to put their homes on the market because of that,” Villalpando says.
6. Terre Haute, IN
Median list price: $82,000
Median list price change: -1.5%
Terre Haute, home of Indiana State University, had a pretty rough year in 2020. COVID-19 took a toll on small businesses while major manufacturing companies in the area like GE Aviation implemented layoffs. Enrollment at local universities plunged as classes moved online, and sporting events that normally bring in scores of tailgaters have been playing without fans.
Meanwhile, violent crime rose 25% in the city last year, which the mayor blamed on economic insecurity during his 2021 city address earlier this month. The opioid epidemic has also taken a toll on the area, with overdoses also on the rise in 2020.
Still, a lack of inventory is making the area a tough market, especially for first-time home buyers or those looking for affordable housing.
“It’s kind of strange what’s going on right now,” says Ed Gallatin, a licensed broker and professor who teaches real estate at Indiana State’s business school. “The prices seem to be depressed, but the houses are moving quite quickly.”
Article by Elena Cox on realtor.com