The four U.S. housing markets being impacted the most by oversupply
Yahoo Finance reporter Dani Romero joins the Live show with the latest on the U.S. housing market and details on which markets are being most impacted by oversupply.
Video Transcript
SEANA SMITH: Potential homebuyers are getting squeezed by higher mortgage rates, and low inventory levels are keeping prices high in the majority of cities. But Goldman Sachs is out with a new note revealing that of the largest 25 metro areas nationwide, four of them, Austin, Seattle, San Francisco, and Phoenix-- you're looking at them on your screen there-- have higher inventory levels in pre-pandemic, and they're actually dealing with an oversupply. Dani Romero joining us now in studio, and Dani, this is pretty fascinating because we talk about the fact that inventory levels nationwide in most cities are very, very low. What's driving this? What do you think is factoring into this oversupply in those cities?
DANI ROMERO: Seana, just not a pretty picture for the West Coast and the Southwest region. Like you said, supply is outpacing demand. So for example, if we move over to the West Coast and San Francisco specifically, it's one of the most expensive cities in America. And home values have drastically declined. Another reason is that the pandemic caused a massive exodus of residents looking for more space, affordable housing in other towns. And you also have to realize that San Francisco is part of Silicon Valley, and the tech industry has been hit by massive tech layoffs. And even though these workers are finding other jobs in other markets, it's still impacting the region.
The good news, though, is that home prices have fallen in this area in San Francisco, so there's not really much competition, which is a really big incentive for sellers, right, to bring buyers into that market. Now, if we move over to Phoenix, Arizona, home prices there have also fallen-- home sales, excuse me, have fallen there, really cooling off from the pandemic frenzy that we saw, right, due to those higher mortgage rates.
And we saw mortgage rates bounce back up towards that 6%, really crushing home buying activity for the moment. But Goldman Sachs does note that the housing outlook looks less dire. And they're expecting that home prices will fall around 6.1%, as mortgage rates head toward that 6.5%. The issue, though, still remains that there is just a big supply of multifamily units, which will really challenge the rental market.
DAVE BRIGGS: It's interesting. Those four cities that you mentioned there, the people you worry about are the ones that bought at peak COVID prices. They're going to get crushed in that two-year period. But the people that brought prior to it are still going to see an increase over that period because prices went up larger than the numbers we showed. I don't know if that makes a whole lot of sense to you, but--
SEANA SMITH: I'm following.
DAVE BRIGGS: --the people that brought prior to that massive increase, they're going to be fine. Their price is still up over a three-year period. If you bought right in the middle, oh, boy, you're getting crushed.
SEANA SMITH: Need some time for the values to get back up.
DANI ROMERO: Yeah, but they're still making some profit off of what they bought, yeah.
DAVE BRIGGS: Interesting. Dani, thank you so much. Appreciate that. Have a good weekend.
