5 Housing Markets at ‘Very High’ Risk of Falling

U.S. home values rose on a year-over-year basis in January but declined from where they were in December, according to property analytics firm CoreLogic.

From January 2022 to January 2023, home values rose 5.5% nationwide. However, January prices slid 0.2% compared with December.

Month-to-month declines may continue, but a crash remains unlikely, according to CoreLogic. In a summary of recent findings, Selma Hepp, chief economist at CoreLogic, says:

“While 2023 kicked off on a more optimistic note for the U.S. housing market, recent mortgage rate volatility highlights how much uncertainty remains. Nevertheless, the continued shortage of for-sale homes is likely to keep price declines modest, which are projected to top out at 3% peak to trough.”

Whatever happens to national housing trends, a few key markets still are in jeopardy of a correction. CoreLogic says the following places are in the greatest danger of slipping during the next 12 months.

Tacoma-Lakewood, Washington

This housing market’s likelihood of a price decline over the next 12 months: Very high (more than 70% probability)

While it’s possible that prices could decline in Tacoma in the short term, housing supply remains constrained in the city and in many parts of Washington.

In response, the Washington state House of Representatives recently passed a bill to legalize the construction of duplexes and fourplexes in virtually every neighborhood of every city in the state.

Salem, Oregon

This housing market’s likelihood of a price decline over the next 12 months: Very high (more than 70% probability)

The U.S. Census Bureau says Oregon lost residents in 2022, the first decline in decades.

If that trend continues, it could mean lower demand for housing. Already, housing starts have slowed in Salem, the Oregon state capital.

Mike Erdmann, chief executive officer of the Home Builders Association of Marion and Polk Counties, told the Salem Reporter he expects a downward trend in the market for new residential construction this year:

“The construction of new homes dropped 36% in 2022 compared to the year prior, but most of that decline was in the latter half of the year when mortgage interest rates rose above 6%. With interest rates showing no signs of dropping substantially in the coming months, builders will continue to be more cautious about starting new construction projects without a buyer already lined up.”

Crestview-Fort Walton Beach-Destin, Florida

This housing market’s likelihood of a price decline over the next 12 months: Very high (more than 70% probability)

As recently as late summer last year, home sale prices were still climbing steadily in this area of the Florida Panhandle.

But if CoreLogic is right, a big change of fortunes could be right around the corner.

Bremerton-Silverdale, Washington

This housing market’s likelihood of a price decline over the next 12 months: Very high (more than 70% probability)

Housing has slipped into the deep freeze in this market near Seattle.

According to one recent report, home construction has slowed more dramatically here than in any other U.S. metro.

Bellingham, Washington

This housing market’s likelihood of a price decline over the next 12 months: Very high (more than 70% probability)

Bellingham is the third market in the state of Washington to make this list.

Although these metros are expected to see home values decline, other parts of the country may fare better this year. For more, check out “The Top 10 Housing Markets for 2023, According to Zillow.”