Falling mortgage demand could cause home prices to drop as much as 20% in pandemic-era homebuying hotspots, even if the remainder of the U.S. housing market continues to post strong gains, Forbes reports. Mortgage applications fell 14.2% from the week prior last Friday after surging rates sent monthly mortgage payments 15% higher over the past six weeks.
Waning homebuyer demand amid historically high home prices and surging borrowing costs may force builders and sellers to significantly reduce prices in areas like Dallas, Austin, and Boise, which previously ranked among the most active housing markets in the country throughout the pandemic.
Though he’s not expecting a nationwide correction, Tejas Joshi, a director at investment firm Yieldstreet, expects home prices could face 20% decline in some regional markets where new home construction will bolster supply— builders will be forced to slash prices “aggressively” in the coming months in areas like Dallas, Austin, Texas, and Boise, Idaho.
He also expects the correction will be worse for pandemic-era hot spots like Phoenix, Austin and Las Vegas that have seen an influx of new residents over the past two years, exacerbating affordability concerns that have made some markets—including a high concentration in the western U.S.—vulnerable to a housing market correction, according to Goldman Sachs.
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