Home prices hit all-time highs in 2022, with the median price increasing by 50% from January 2020. High mortgage rates have slowed down the housing market considerably, with Redfin predicting that the median U.S. home price could drop by close to 4% in 2023, posting the first year-over-year decline in a decade.
Home sales will also decline, falling to the lowest level since 2011, a drop of 30% from 2021. While many areas are already experiencing a decline in prices, some are expected to be even more expensive this year.
Pandemic migration hotspots like coastal cities and those in the Sun Belt saw the biggest increases in the housing market frenzy in the aftermath of COVID-19. Home prices in Malibu, California surged by 82% from the first quarter of 2021 to 2022. The East Coast also saw record gains, with the average home price of the Hamptons in New York increasing by 25% and the number of homes available falling to a record low.
Home prices went up the most in cities such as Austin, Boise, and Phoenix, areas that were prime destinations during the initial phase of the pandemic. These places are expected to see the most volatile prices since there is a lot more room for prices to drop compared to areas that didn't see as much growth.