Things are changing in the American real estate market.

After turning up the heat all summer with a seller’s market that saw record-high prices and fierce competition, the U.S. housing market is cooling down – and it’s expected to stay that way for a while.

According to the latest data from the Knock Buyer-Seller Market Index, 98 per cent of the largest U.S. markets saw home prices decline in September from their 2022 peaks.

In 15 markets, prices dropped by 10 percent. Forty-two other markets are expected to fall even further from their 2022 peaks by September 2023.

It’s safe to say the U.S. is on its way to an overall buyer’s market, meaning significantly more balance compared to the unpredictability seen earlier this year.

In September, the total number of buyer’s markets grew to 16 – more than double the amount in August. By September 2023, expect that number to go up to 27.

What’s a buyer’s market?

A seller’s market occurs when there are more buyers than homes on the market – meaning soaring prices and more competition for homes.

A buyer’s market is opposite to a seller’s market. More homes than buyers, lower prices and less competition characterize a buyer’s market.

Western and Southern regions saw largest home price drops

Of the 15 markets that saw home prices drop by 10 percent or more in September, seven of them are in the West. Another seven are in the South, and just one is in the Northeast.

Here’s where home prices dropped the most in September:

  • Reno, Nevada (-14.0%)
  • Winston-Salem, N.C. (-13.1%)
  • Boise City, Idaho (-13.1%)
  • Austin, Texas (-12.7%)

Home prices expected to continue falling

42 major housing markets are projected to fall further from their record highs by September 2023. Most of these are in the South and West, which already saw a significant decline in home prices this year.

15 of those markets saw median home prices peak well above the national high in April 2022. So, while expensive markets like San Francisco will remain well above the national median home price of $410,000, it paints a much prettier picture for homebuyers who were scoffing at the region’s $1.3 million median sale price.

Here are the top 10 markets with forecasted price drops for September 2023:

  • Boise City, Idaho (-16.2%)
  • Lakeland, Florida (-14.2%)
  • Las Vegas, Nevada (-14.2%)
  • Reno, Nevada (-9.3%)
  • San Francisco, California (-11.7%)
  • San Jose, California (-9.8%)
  • Austin, Texas (-9.8%)
  • Oxnard, California (-9.3%)
  • New Orleans, Louisiana (-9.3%)
  • Ogden, Utah (-8.3%)

Even more U.S. markets expected to flip to favour buyers by next year

Despite a notable cool-down, most markets in the U.S. favor sellers – but that is about to change.

In August, 83 markets were considered seller’s markets. By September, that number dropped to 51. Looking towards next September, the market is projected to skew more towards buyers in general with 27 major housing markets being considered buyer’s markets.

27 out of 10 major markets may not seem like a lot – but neutral markets tend to help. By 2023, 30 markets are projected to be neutral, meaning only 43 major U.S. markets will favor sellers.

The projections for next year spell good news for prospective buyers and investors, as the fall of 2023 is expected to be one of the most favourable national markets for buyers.

On the flip side, sellers can expect more neutral markets in March and April to deal a few cards in their favor.

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