The tech hub housing market was in high demand during the pandemic, with potential buyers facing stiff competition for homes in cities like San Jose and Austin. That trend is now reversing as mortgage rates continue to rise.
A new report from Redfin shows that bidding wars were common in tech hubs at the height of the pandemic, but housing markets in those regions are cooling faster than markets elsewhere in the country.
Austin, Texas had the fastest housing downturn in the country last year, according to Redfin analysis. Seattle, Phoenix, Tacoma, Denver, Las Vegas, Stockton, San Jose, Sacramento and Oakland round out the top ten.
Austin was the most popular migration destination in the US in early 2021, but Texas’ tech hub has been hit by tech layoffs, declining tech stock values and unsustainably high home prices. According to Redfin’s analysis, it has cooled faster than any other U.S. housing market over the past year.
Austin’s total supply of homes for sale in February increased 140% year-over-year, according to Redfin data. This is her second largest increase in the United States. Pending sales also fell by 40% for him.
Additionally, only 16% of Austin homes were contracted within two weeks of being on the market. This is down significantly from his February 2022, when 38% of his Austin homes were contracted within two weeks of going public.
The story is similar in San Jose, Calif., where a typical home sold just 0.6% above asking price in February and 12% above asking price a year ago. This is the largest year-over-year percentage point drop nationwide. San Jose’s pending home sales were also down 38% on an annual basis.
The Seattle market was also disproportionately affected by last year’s technology disruption.
In Seattle, about 8% of homes sold above asking price in February 2022, but by February 2023, only 1% of homes sold below asking price. Decreased. Pending home sales were also down 40% year-over-year in this market.
Bay Area Redfin manager Shelley Rocha said buyers in the Seattle and Bay Area markets are abandoning searches or canceling deals out of fear of losing their jobs.
Technologist layoffs and declining tech job prospects are preventing some first-time buyers from entering the market, according to the report.
“Sellers are trapped because they can’t justify giving up their 2.9% mortgage rate to buy a new home at 6.5%,” said Kimberly Douglas, manager of the San Jose Redfins. All products on the market between $1M and $2M are selling quickly with multiple offers, 1 listing scheduled in preferred area with highly rated schools But my only concern is that they sell out too quickly and the owner doesn’t have time to find a new one.”
Phoenix has been another attraction for remote tech workers during the pandemic. The city’s housing market has suffered a similar fate.
In Phoenix, 70% of homes for sale saw prices drop in February, up from 21% a year ago. Phoenix is also one of the markets with the biggest rise in seller concessions, another indicator of weaker demand.
Conversely, many of the housing markets in Connecticut, Upstate New York, and the Midwest held onto their best levels last year, Redfin data shows. Hartford, Connecticut has the highest, followed by Milwaukee, New Haven, Bridgeport, Albany, and Rochester.
Analyzes show that these markets have been isolated because they are relatively affordable and less susceptible to the surge in tech layoffs and problems with tech stocks that have affected other sectors.
Redfin’s report compares year-over-year changes in prices, markdowns, supplies, pending sales, sales-to-list ratios, and other factors to see the fastest cooling from February 2022 to February 2023. Identified the housing market.