'Brutal' housing prices hit America's Zoom towns – markets once flourishing in the pandemic
- After two years of bidding wars, above-asking and no contingency offers, many of the Zoom towns are now seeing a massive slowdown.
- The percentage of active listings in Boise with price drops went up from 14% in February to 68% in July.
- More than 15% of homesellers dropped their price in July in each of the 97 metros nationwide, Redfin reports..
When Miriam Stocking listed her house for sale in March in the Boise, Idaho, area, she was not inundated with multiple offers.
Instead, she received one offer above the $725,000 asking price but the buyers soon backed out saying they’d decided they wanted an open-floor plan instead.
By June, she’d closed on a deal that was $25,000 below asking.
Stocking's home is in a Zoom town – towns that attracted remote workers as they fled expensive cities during the pandemic.
After two years of bidding wars, above-asking and no contingency offers, many of the Zoom towns are now seeing a massive slowdown.
“The craziness of the market from the previous year had definitely cooled down,” she says. “But we were also asking for a premium price for our home.”
In Boise, the median sale price for a home jumped from $340,000 in May 2020 to $487,500 in May 2021, a 43.4% year-over-year increase. In May 2022, that number went to $585,000, a 20% increase from the previous year.
Since May, however, the year-over-year price increase has slowed down considerably, with July registering only a 4.5% year-over-year increase.
At the same time, the percentage of active listings with price drops increased from 14% in February to 68% in July, according to a Redfin analysis shared with USA TODAY.
In Austin, Texas, listing price drops went from 8% in February of active listings to 46% in July. In Phoenix, it increased from 12% to 49% and in Cape Coral, Florida, it went from 19.5% to 40%, during the same period.
“A lot of the places, the Zoom towns that rose really rapidly in prices are cooling very rapidly and there's been a pretty swift change,” says Redfin Economist Sheharyar Bokhari. “Price drops are increasing, and it's all been driven by the mortgage rates going up. And the Zoom towns are leading the cooldown.”
The average 30-year fixed mortgage rate went from 3.22% on Jan. 6 to 5.55% on Aug. 25, according to Freddie Mac.
More than 15% of homesellers dropped their price in July in each of the 97 metros nationwide, according to a Redfin analysis.
In places like Austin and Phoenix, rapid construction of new homes is adding to the inventory and putting downward pressure on prices, says Bokhari.
Good time to sell a home in a Zoom town?
Setting seller expectations has been the biggest challenge in navigating the slowing Zoom town markets, real estate agents say.
“It’s a shift from the last two years,” says Shauna Pendleton, a real estate agent in Boise. “It was like, you put your house on the market and it's 10 offers in 48 hours. A lot of sellers are almost resenting themselves that they did not sell sooner and missed the peak of the market.”
Pricing a home correctly is one of the biggest challenges sellers are facing, she says.
Sellers want to price their homes based on their neighbor’s sale price. But that may not be a good gauge anymore.
“The home might have sold 60 days ago, but you can’t use the comp from 60 days ago because they were probably on the market 30 to 60 days prior to that,” says Pendelton. “The pricing discussion is very, very brutal right now.”
Buyers in Zoom towns are equally nervous.
“With everything going on in the economy and the mortgage rates, they’re afraid to make that move, but more so they just really worried prices are going to come down even further,” she says.
There’s one piece of advice she’s been giving her buyers lately:
“Marry the house, date the rate.”
In the last few months, Pendleton says, she's worked with many sellers who decided to cash in on the pandemic price boost and move to cheaper locations.
The Stockings, of Boise, recently moved to Green Bay, Wisconsin, to be close to their grandkids.
"Boise is a beautiful, wonderful place, but it just got too large for us," Miriam says. "The biggest challenge was traffic."
Idaho gained 53,151 new residents at a growth rate of 2.9% from December 2020 to December 2021, according to the U.S. Census data. The data shows that 48,876 of Idaho’s newest residents came from other states.
But her new home has the same small-town feel that Boise once had.
"And we paid less for a much bigger house," she says.
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.