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Which Texas markets are poised for falling home prices, which predicted to rise: Moody’s Analytics new two-year forecast

As the aftermath of the pandemic continues to roll out amongst rising inflation and mortgage rates, the landscape of real estate in the U.S. and Texas continues to morph. While the changes could spell trouble for certain markets and gaining momentum in others, they seem to be headed towards eventual equilibrium, experts say.   

In the latest forecast model from Moody’s Analytics, the financial intelligence company’s proprietary software found that of the top 414 U.S. housing markets, 210 will see price declines in the following two years, while 204 will increase. Nearly all major metropolitan areas of Texas found themselves on the list of those vulnerable to falling prices, with Austin landing not far from the country’s top ten. 

The housing market with the highest projected price decrease in the next two years is The Villages, Florida at an estimated decline of 12.8%. Five more Florida markets made the top ten: Punta Gorda (-11.4%), Cape Coral (-9.4%), Ocala (-9.3%), Fort Lauderdale (-8.6%), and Palm Bay (-7.6%). Also topping the list were Spokane, Washington (-9.4%); Lake Havasu City, Arizona (-9%); Reno, Nevada (-8.2%) and Missoula, Montana (-7.7%). While Austin, not far from these numbers, is expected to see a two-year fall just shy of 7%. 

Of the major Texas metros, Austin’s projection is by far the most drastic, with Houston predicted to see little change at all, and San Antonio and Dallas with slight decreases around 1%. Prices in El Paso and Brownsville, however, are expected to rise by 2.87% and 4.43%, respectively. 

The markets most expected to see gains in home prices are Albany, NY (+9.8%); Casper, Wyoming (8%); New Bern and Rocky Mount, North Carolina (+7.6%, 7.3%); Augusta, Georgia (+7.2%) and Hartford, Connecticut at (7.1%). Hovering around 6% gains were Columbus, Georgia; Farmington, New Mexico; Valdosta, Georgia and Danville, Illinois. 

The real estate boom brought on by the pandemic caused a housing market that was historically affordable to reach an unaffordable level in just two years. This is the largest driving factor behind falling prices in these 210 markets, especially those overpriced at a high percentage (like Austin at 48%), where the market has “not only priced out many locals, but hefty price tags have also become a deterrent for folks considering relocating there,” said Forbes in their analysis of the model. 

What does this mean for Austin homeowners or those looking to purchase in the near future? Well, don’t panic – with a 48% increase since 2019, even the full predicted 7% decrease would still equal a massive two-year gain of 41%. None of the new models predict a national home price decline, and U.S. homeowners today are generally in better financial shape than real estate bubbles of the past. 

Lawrence Yun, chief economist at the National Association of Realtors, mentions that some effects of the pandemic could be here to stay. “What I can say is that those markets that boomed were driven by strong local job creations and from new residents moving into those regions, including as retirees,” he said. So places like Austin, “Phoenix, Tampa and Boise, you may or may not see any meaningful price decline. They could also be primed for even more price gains.”

While Austin may be due for a leveling-out, there are no signs of crisis ahead, if anything it’s welcome news for buyers who have been patiently waiting these last two years. “People are still moving in from California and they still have enough money to buy nice homes in desirable neighborhoods, sometimes with all cash,” said Austin Redfin agent Gabriel Recio. “But the days of homes selling for 25% over asking price with multiple offers are over. Buyers are no longer as eager now that mortgage rates are up and there’s buzz in the air about the slowing housing market. Local buyers–and even buyers coming from out of town–now have a chance to take their time and buy a home at asking price or even under asking price.” 

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