High mortgage rates, persistent inflation and economic uncertainty are cooling down expensive markets like Seattle and San Jose, along with pandemic homebuying hotspots like Las Vegas and Phoenix

(NASDAQ: RDFN) — Seattle’s housing market is slowing faster than any other housing market in the country amid rising mortgage rates, inflation, a slowing stock market and broad economic uncertainty, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

That’s according to a Redfin analysis that ranks the 100 most populous U.S. metropolitan areas based on how quickly they’re cooling, according to the change in numerous housing metrics from February 2022 to August 2022. Those metrics are prices, price drops, supply, pending sales, sale-to-list ratio and speed of home sales.

The 10 markets cooling fastest are almost all either West Coast markets that have long been expensive, or places that became significantly less affordable during the pandemic because they attracted scores of relocating homebuyers. Las Vegas came in second place, followed by San Jose, CA, San Diego, Sacramento, CA, Denver, Phoenix, Oakland, CA, North Port, FL and Tacoma, WA.

Seattle, San Jose, San Diego, Sacramento, Denver and Oakland are all among the 15 most expensive housing markets in the U.S. Las Vegas, San Diego, Sacramento, Phoenix and North Port are all on Redfin’s list of the 10 most popular migration destinations. That’s based on net inflow, or how many more Redfin.com users looked to move in than leave.

“These are all places where homebuyers are feeling the sting of rising home prices, higher mortgage rates and inflation very sharply. They’re slowing down partly because so many people have been priced out and partly because last year’s record-low rates made them unsustainably hot,” said Redfin Chief Economist Daryl Fairweather. “The good news is that the slowdown is dampening competition and giving those who can still afford to buy more negotiating power.”

Rising mortgage rates are making pricey areas like Seattle even more expensive, causing buyers to back off

Measures of homebuyer demand and competition are dropping off quicker in Seattle than any other major metro this year. About 34% fewer homes sold within two weeks in August than a year earlier, a big swing from the 7% increase in February. And the typical home sold for 5% more per square foot in August than a year earlier, compared with a 23% year-over-year increase in February. Additionally, home prices are falling from their peak, with the typical home selling for 2% less in August than a month earlier.

The housing market is cooling particularly quickly in the Seattle area and other pricey West Coast metros like San Jose, Oakland and San Diego largely because the Fed’s rate hikes and resulting rising mortgage rates have made it even more difficult to afford a home in those already-expensive places. In dollar terms, high mortgage rates make a bigger difference for more expensive homes. The typical monthly mortgage payment on the median-priced Seattle home, which costs $775,000, is more than $4,400 with today’s 6% mortgage rates. That’s up from about $3,300 with the 3% interest rates common at the beginning of the year.

“A lot of sellers aren’t able to get the price they want because buyers don’t want to compete with other offers when mortgage rates are double what they were a year ago,” said Seattle Redfin agent David Palmer. “That means there are fewer sellers listing their homes and fewer buyers making offers on the ones that do hit the market.”

Economic forces like rising rates, inflation and the unpredictable stock market are a double-edged sword for homebuyers: They make it more difficult for house hunters to buy homes, but they also make the housing market friendlier for those who can afford to purchase a home. Prospective buyers who can still afford to buy a home finally have negotiating power, meaning they have more time to find the right home, they can include contingencies like inspections and appraisals in their offers, they’re unlikely to face bidding wars and they may be able to get an offer accepted for under the asking price.

Relocation hotspots like Las Vegas and Phoenix also feel the sting of rising rates, inflation

Rising mortgage rates are also a major factor in the quick cooldown in homebuying hotspots for relocating remote workers like Las Vegas, Sacramento, Phoenix and North Port, making those markets attractive for buyers who can afford to remain in the market.

Those places all welcomed scores of remote workers from pricier parts of the country like Seattle and the Bay Area, many of whom were cashing in on last year’s record-low mortgage rates. The influx of out-of-towners caused home prices to rise rapidly. The typical Las Vegas home cost $416,000 in August, up nearly 35% from $310,000 in August 2020, at the start of the pandemic. And in Sacramento, the typical home sold for $570,000, up 33% from $430,000. Those higher home prices combined with higher mortgage rates have sent those areas from affordable to not-so-affordable, dampening demand and slowing the market.

But while homes are still more expensive than they were before the pandemic, demand has slowed enough that prices are falling from their peak and supply is building. Las Vegas home prices were down 3% in August from the month before. And about 26% fewer homes sold within two weeks than a year earlier, compared with a 6% increase in February.

“The housing market has changed very quickly in buyers’ favor,” said Las Vegas Redfin agent Tzahi Arbeli. “Not only have prices fallen in recent months, but sellers see the market cooling and they’re more open to negotiating prices, giving concessions and paying closing costs. They may accept an offer that’s $20,000 below asking price and pay for repairs the buyer found during an inspection. Sellers can still get a fair price—but it’s with the understanding that they may have to wait several weeks for the right offer, and buyers are no longer willing to overpay.”

To view the full report, including methodology, please visit: https://www.redfin.com/news/housing-markets-cooling-fastest-seattle-august-2022/

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, instant home-buying (iBuying), rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country's #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 6,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

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