The Housing Market’s Correction Has Begun: Analyzing June’s Data

Abstract

The question then becomes, which markets are at risk of decline, and which will see prices stay steady or even grow? In this article, I will explore data to determine the short-term strength of individual housing markets in the U.S. to help you identify opportunities and make informed investing decisions. As I've written before, the main trend shifts that need to occur for housing prices to moderate or decline is that both active listings and days on market need to increase. You can read all about why I believe this here, but in short, active listings and days on market are good measurements of the balance between supply and demand in the housing market. To showcase the differences, let's look at a few of the recent boom's biggest winners: Boise, ID, and Asheville, NC. Boise was perhaps the hottest housing market over the last several years, with prices increasing 59% from June 2019 to June 2022. Remember, my hypothesis is that markets where active listings and days on market are near pre-pandemic levels are at the greatest risk of a correction. Rather than skyrocketing, active listings are down 11% year-over-year! Days on market are also down 8% year-over-year, and price drops are up only 18% YoY. To me, this shows a housing market that is very strong and is unlikely to see a big change in prices. Some markets seem very strong and will likely keep growing, while other markets seem like they could be heading for price corrections in the coming months.