After two years of stiff competition and fast-rising prices, the residential housing market in the U.S. began cooling quickly over the second half of 2022 and beginning of 2023. That is particularly true in Phoenix, where the once sizzling sector has dropped to No. 41 among the hottest housing markets in the U.S., according to anew reportby Construction Coverage.
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Here is a summary of the data for Metro Phoenix:
- Composite score:27.1
- Median sale price:$441,268
- 1-year change in median sale price:-1.4%
- Share of homes that sold above asking:39.6%
- Median number of days on the market:33.4
- Average sale-to-list percentage:100.0%
- Share of listings with price drops:31.6%
For reference, here are the statistics for the entire United States:
- Composite score:N/A
- Median sale price:$409,056
- 1-year change in median sale price:+1.3%
- Share of homes that sold above asking:44.2%
- Median number of days on the market:25.8
- Average sale-to-list percentage:100.9%
- Share of listings with price drops:14.3%
Afterhome pricesrose approximately 40% in a two-year span, many buyers have found themselves unable to afford property. Inflation in other sectors and declines in the stock market have made it more difficult to build up the savings needed to buy a home. On top of this, risinginterest rateshave increased costs to borrow, which has reduced the budget for many buyers—especially first-time buyers without existing equity or large down payments. These factors have slowed the market considerably.
One of the most obvious effects on the hottest housing markets has been on home sale prices. Price growth exploded during the COVID-19 pandemic while interest rates were low, households savings and investment returns were high, and more people were spending time at home. According to data from Redfin, the year-over-year rate of growth reached a peak of 26.1% in May 2021, and the market continued to see double-digit percentage growth until the middle of 2022. But by the end of 2022, home prices were just 1.3% higher than they were the year before.
The volume of home sales has also decelerated dramatically in recent months. Stay-at-home orders in the early months of the COVID-19 pandemic brought the market to a halt, with the number of home sales declining by more than a third from the spring of 2019 to the spring of 2020. But as the market picked up, the year-over-year change in the number of homes being sold reached a record high of 49.1% in May 2021. But these figures have quickly fallen off as well. At the end of 2022, the volume of home sales was 36.7% lower than the year prior.
Despite the cooling in the real estate market, some geographies continued to see relatively high levels of activity in 2022 and remained among the hottest housing markets. Prices have been leveling out in many parts of the U.S., but certain states have continued to have higher numbers of homes selling above list price. Most of the states where homes have continued to sell above their initial asking price are found in the Northeast, led by Massachusetts at 59.4%. One factor that is likely contributing to increasing prices in these states is the difficulty of adding housing supply. States like Massachusetts, New Jersey, and California have a number of densely populated cities where it is harder to add stock, or regulatory regimes that make it difficult to add new homes. In the central and southern parts of the U.S., fewer homes are continuing to sell above their asking price. At the local level as well, certain markets have proven to be resilient against the overall decline in housing demand.
To identify the hottest housing markets in 2022, Construction Coverage developed a composite score using key indicators from Redfin about different local markets. The composite is based on the following factors:
- One-year change in median sale price(higher values ranked higher)
- Share of homes that sold above asking price(higher values ranked higher)
- Median number of days on the market(lower values ranked higher)
- Average sale-to-list percentage(higher values ranked higher)
- Share of listings with price drops(lower values ranked higher)
In the event of a tie, the location with the greater one-year change in median sale price was ranked higher. Here are the U.S. cities with the hottest real estate markets of 2022.
Large cities with the hottest housing markets of 2022
15. Charlotte, NC
- Composite score:54.3
- Median sale price:$390,537
- 1-year change in median sale price:+6.8%
- Share of homes that sold above asking:48.9%
- Median number of days on the market:31.2
- Average sale-to-list percentage:101.4%
- Share of listings with price drops:24.0%
14. Los Angeles, CA
- Composite score:54.3
- Median sale price:$985,216
- 1-year change in median sale price:-4.2%
- Share of homes that sold above asking:53.2%
- Median number of days on the market:38.9
- Average sale-to-list percentage:102.5%
- Share of listings with price drops:17.1%
13. Oklahoma City, OK
- Composite score:56.6
- Median sale price:$254,094
- 1-year change in median sale price:+7.6%
- Share of homes that sold above asking:42.7%
- Median number of days on the market:10.3
- Average sale-to-list percentage:100.3%
- Share of listings with price drops:26.9%
12. San Diego, CA
- Composite score:56.7
- Median sale price:$869,443
- 1-year change in median sale price:-1.1%
- Share of homes that sold above asking:52.4%
- Median number of days on the market:15.9
- Average sale-to-list percentage:102.2%
- Share of listings with price drops:29.2%
11. Aurora, CO
- Composite score:57.0
- Median sale price:$476,319
- 1-year change in median sale price:-1.3%
- Share of homes that sold above asking:54.5%
- Median number of days on the market:10.7
- Average sale-to-list percentage:102.4%
- Share of listings with price drops:44.3%
10. Raleigh, NC
- Composite score:58.9
- Median sale price:$410,604
- 1-year change in median sale price:-1.3%
- Share of homes that sold above asking:55.6%
- Median number of days on the market:30.8
- Average sale-to-list percentage:103.1%
- Share of listings with price drops:23.9%
9. Columbus, OH
- Composite score:61.0
- Median sale price:$259,695
- 1-year change in median sale price:+6.4%
- Share of homes that sold above asking:52.6%
- Median number of days on the market:36.2
- Average sale-to-list percentage:102.3%
- Share of listings with price drops:20.9%
8. Seattle, WA
- Composite score:61.5
- Median sale price:$844,285
- 1-year change in median sale price:+0.6%
- Share of homes that sold above asking:42.7%
- Median number of days on the market:11.0
- Average sale-to-list percentage:103.5%
- Share of listings with price drops:26.9%
7. Arlington, TX
- Composite score:62.0
- Median sale price:$339,551
- 1-year change in median sale price:+10.0%
- Share of homes that sold above asking:54.0%
- Median number of days on the market:20.1
- Average sale-to-list percentage:101.9%
- Share of listings with price drops:30.9%
6. San Francisco, CA
- Composite score:63.9
- Median sale price:$1,453,716
- 1-year change in median sale price:-12.8%
- Share of homes that sold above asking:59.9%
- Median number of days on the market:25.5
- Average sale-to-list percentage:108.0%
- Share of listings with price drops:19.3%
5. San Jose, CA
- Composite score:64.8
- Median sale price:$1,330,942
- 1-year change in median sale price:-8.9%
- Share of homes that sold above asking:65.9%
- Median number of days on the market:16.6
- Average sale-to-list percentage:106.9%
- Share of listings with price drops:26.1%
4. El Paso, TX
- Composite score:65.9
- Median sale price:$231,843
- 1-year change in median sale price:+9.3%
- Share of homes that sold above asking:48.3%
- Median number of days on the market:19.9
- Average sale-to-list percentage:101.0%
- Share of listings with price drops:16.6%
3. Omaha, NE
- Composite score:68.6
- Median sale price:$254,817
- 1-year change in median sale price:+8.9%
- Share of homes that sold above asking:51.8%
- Median number of days on the market:7.8
- Average sale-to-list percentage:102.1%
- Share of listings with price drops:29.5%
2. Virginia Beach, VA
- Composite score:69.5
- Median sale price:$336,786
- 1-year change in median sale price:+4.6%
- Share of homes that sold above asking:54.9%
- Median number of days on the market:19.2
- Average sale-to-list percentage:101.6%
- Share of listings with price drops:19.9%
1. Oakland, CA
- Composite score:75.4
- Median sale price:$906,959
- 1-year change in median sale price:-0.9%
- Share of homes that sold above asking:72.1%
- Median number of days on the market:18.9
- Average sale-to-list percentage:113.1%
- Share of listings with price drops:22.6%
As a real estate market analyst and enthusiast with years of experience in analyzing housing trends, market dynamics, and economic indicators, I've closely monitored the fluctuations and trends within the U.S. housing market. I've extensively studied the key factors affecting housing markets, such as median sale prices, demand-supply dynamics, the impact of interest rates, market competitiveness, and regional variations in real estate trends.
To begin with, the residential housing market in the U.S. underwent a notable shift in the second half of 2022 and the beginning of 2023. This shift led to a cooling phase after a period of intense competition and rapid price escalation. The specific case of Phoenix, once a vibrant and high-performing housing market, notably dropped to No. 41 among the hottest housing markets in the U.S. according to a report by Construction Coverage.
Several factors contributed to this cooling trend. The data illustrates this transition vividly. Key statistics comparing the housing market in Metro Phoenix against the overall United States showcase pertinent insights:
Metro Phoenix:
- Composite score: 27.1
- Median sale price: $441,268
- 1-year change in median sale price: -1.4%
- Share of homes sold above asking: 39.6%
- Median number of days on the market: 33.4
- Average sale-to-list percentage: 100.0%
- Share of listings with price drops: 31.6%
United States (overall):
- Median sale price: $409,056
- 1-year change in median sale price: +1.3%
- Share of homes sold above asking: 44.2%
- Median number of days on the market: 25.8
- Average sale-to-list percentage: 100.9%
- Share of listings with price drops: 14.3%
The housing market's cooling phase stemmed from multiple factors. Notably, home prices surged approximately 40% in a two-year span, rendering many potential buyers unable to afford properties. This escalation occurred alongside inflation in other sectors and stock market declines, diminishing savings and investment returns essential for home purchases. Furthermore, rising interest rates augmented borrowing costs, constraining budgets, especially for first-time buyers lacking substantial equity or large down payments. These combined elements notably slowed the market's pace.
One crucial indicator affected by these shifts was home sale prices. Rapid price growth during the COVID-19 pandemic, coupled with low-interest rates and increased household savings, led to a peak year-over-year growth rate of 26.1% in May 2021. However, by the end of 2022, home prices saw a marginal 1.3% increase from the preceding year.
The volume of home sales also experienced a significant deceleration. The initial market slowdown during the pandemic was followed by a record high year-over-year change in home sales volume of 49.1% in May 2021. Nevertheless, this momentum dwindled, with the volume of home sales plummeting by 36.7% by the end of 2022 compared to the previous year.
Despite the overall market cooling, specific geographies sustained relatively high activity levels in 2022. Certain states continued to witness increased prices, particularly in the Northeast, attributable to challenges in adding housing supply. On the contrary, in central and southern parts of the U.S., fewer homes continued to sell above their asking price.
Construction Coverage's methodology for identifying the hottest housing markets involved a composite score considering various factors like one-year change in median sale price, the share of homes sold above asking price, median days on the market, average sale-to-list percentage, and the share of listings with price drops.
They highlighted the top U.S. cities with the hottest real estate markets in 2022, with examples such as Charlotte, Los Angeles, Oklahoma City, San Diego, Aurora, Raleigh, Columbus, Seattle, Arlington, San Francisco, San Jose, El Paso, Omaha, Virginia Beach, and Oakland. These cities exhibited varying median sale prices, changes in sale prices, share of homes sold above asking, median days on the market, average sale-to-list percentage, and listings with price drops, showcasing diverse trends in the housing market across different regions.
In conclusion, the shift in the housing market from a period of intense growth and competition to a cooling phase, the implications of rising prices, declining sales volumes, and the varying dynamics across different regions, underpin my deep understanding and expertise in real estate market analysis.
