Home prices are falling fastest in these 25 cities, helping buyers escape the least affordable housing market since 1985

Home affordability is the worst it’s been since 1985, largely due to high mortgage rates.
Still, property prices haven’t fallen as anticipated since supply is severely limited.
Here are the 25 metropolitan areas where home prices fell significantly in the third quarter.

Affording a home in the United States hasn’t been this difficult since “Back to the Future” was the highest-grossing film in theaters.

According to data from the National Association of Realtors (NAR) shared exclusively with Insider, home affordability fell again in the third quarter to its lowest level since 1985.

As property prices continue to rise, prospective buyers are out of luck. According to the NAR’s Q3 US housing market report released on November 9, the median US home cost $406,900 in Q3, which was 2.2% higher than the previous year. This follows a 2.4% year-on-year drop in Q2.

As if rising home prices weren’t difficult enough, buyers must also contend with 23-year-high mortgage rates.

According to the NAR, 30-year fixed mortgage rates ranged from 6.8% to 7.3% last quarter. In turn, the trade group reported that the average monthly payment for a standard starter home with a 10% down payment increased 6.9% from the previous quarter and a crippling 19% year on year in the third quarter.

According to the NAR, nearly 27% of a typical family’s monthly income went toward mortgage payments in Q3, which was slightly higher than the 25.3% rate in Q2 and the 23.5% rate in Q3 2022. Families needed at least a six-figure income to afford such a setup in nearly half of US markets.

Homeowners are naturally hesitant to relocate because they would face exorbitant borrowing costs. Furthermore, by remaining put, they benefit from rising home values caused in part by limited supply. This leads to a self-fulfilling prophecy in which a housing shortage drives up prices even further.

“Homeowners have accumulated sizable wealth, with a typical homeowner gaining more than $100,000 in overall net worth since 2019 and before the height of the pandemic,” said Lawrence Yun, the NAR’s chief economist, in a statement for the new report.

She went on to say: “However, the persistent lack of available homes on the market will make the dream of homeownership increasingly difficult for younger adults unless housing supply is significantly boosted.”

25 cities where home prices receded in Q3

Contrary to popular belief, property prices did not plummet as a result of high mortgage rates.

Home values increased in 82% of the real estate markets tracked by the NAR, significantly higher than the 58% rate from April to June. Even more striking is that 11% of metropolitan areas saw double-digit price growth, more than doubling the prior quarter’s 5% rate.

According to the NAR, single-family home prices rose by just over 5% in the Northeast and Midwest, respectively, while the South and West saw milder increases of 1.7% and 0.6%.

Property prices did, however, fall in some cities. In Q3, 38 metro areas saw prices fall from 2022, with 25 seeing significant drops of more than 1%.

“Following the big price changes during the last several years, it’s natural to witness momentary swings in prices,” Yun stated in the press release. “Some markets that experienced sizable home price gains since 2020 have turned lower, resulting in temporary relief for prospective home buyers.”

The 25 US metro areas with single-family home prices that fell at least 1% from last year in the third quarter are listed below. Each market’s year-over-year home price change and median home price in the second and third quarters of 2023, as well as the third quarter of 2022, are included.

1. Austin

Jeremy Woodhouse/Getty Images

Year-over-year price change: -10.3%

Median home price in Q3 2023: $485,700

Median home price in Q2 2023: $496,300

Median home price in Q3 2022: $541,600