The Worst Cities To Own A Home In Right Now
San Jose, California, San Diego, California, Austin, Texas, and Phoenix, Arizona, are currently the worst cities to own a home in, as market analysts predict that home values there will decline by more than 25%.
Buying a home is an investment that is supposed to bring your family security for decades to come as the value appreciates while you pay down your mortgage it is a win-win situation. Home buyers in a few specific US cities are forecasted to experience the exact opposite of that philosophy in 2023. If you are a homeowner in either San Jose, California, San Diego, California, Austin, Texas, or Phoenix, Arizona it is anticipated in the coming year that your home value will greatly diminish while interest rates sore upwards creating higher payments on adjustable-rate mortgages making these cities the worst to own a home in currently.
The level of decline in these cities is being compared to the level of home value decline homeowners saw all across America during the Great Recession in 2008 housing market crash. According to Fox4, “Home prices across the U.S. fell around 27% at the time, according to the S&P CoreLogic Case-Shiller index.” Whether the decline in home value in these markets reaches that 27% apex remains to be seen, but forecasters are anticipating the decline to move above the 25% threshold.
The 2023 revised forecast is reflective of the thought that interest rates will continue to remain at elevated levels than what they were priced at originally. That is determined by 10-year treasury yields that are expected to reach their peak in the third quarter of 2023. For this reason, most financial experts are anticipating that the interest rates for a 30-year mortgage will crest at 6.5% which is equivalent to a 30 bp increase over prior expectations.
The overheated housing markets in the Southwest and on the Pacific coast will spurn the dramatic devaluation of homes in those areas making homeowners cringe. When we look at cities that will be adversely affected by this devaluation, they will be concentrated in the areas like San Diego, Austin, San Jose, and Phoenix. And if we compare it to the areas that were hardest hit in the 2008 housing crash, the map is almost identical with Arizona and California leading the way in foreclosures and bank-repossessed properties.
During the Covid-19 pandemic housing boom, these cities that became the worst to own a home in became too far detached from the fundamentals of home ownership. This is why there is a higher localized risk with peak-to-trough declines over that 25% devaluation mark, and that will certainly increase delinquencies for mortgages that originated in 2022 or late 2021. According to Fox4, quoting a Goldman Sachs strategist, “many Northeastern, Southeastern, and Midwestern markets could see milder corrections.”
This potential downturn is not going to be restricted to these 4 cities named the worst to own a home in 2023, but the devaluation will be milder. The forecast for the housing market does however have a caveat of hope, with recent estimates that have the overall economy making a soft landing and avoiding a dreaded nationwide recession then they say by 2024 we should see home values in most markets move from depreciation to a below average trend of appreciation. This will be welcome news, especially to the cities of Austin, San Diego, Phoenix, and San Jose which have topped our list of worst cities to own a home to begin 2023.
