US with Soaring Interest Rates Sees Increasing Number of Cities with Falling Home Prices 'Highest in 11 Years'

The annual decline is limited to 0.2%

What about the decline in U.S. home prices, the epicenter of the interest rate surge? Due to the surge in mortgage rates, housing demand has decreased, leading to an increase in the number of cities experiencing home price declines to the largest scale in 11 years. However, the overall decline was minimal.

Among 221 major U.S. cities, the proportion of areas with falling home prices rose to 31% (69 major cities) in the first quarter of this year, according to the National Association of Realtors (NAR) on the 9th (local time). The Wall Street Journal (WSJ) reported that due to last year's surge in mortgage rates, nationwide housing demand decreased, resulting in a record increase in the number of areas with declining home prices?the largest in 11 years.

By region, the West, which saw the largest surge during the COVID-19 pandemic, experienced the steepest declines. San Francisco led the home price decline trend as the population leaving downtown due to remote work increased, and crime and homelessness surged, raising public safety concerns. According to U.S. real estate brokerage Redfin, home prices in the San Francisco area fell by an average of 13.3% during this period.

However, in the South and Midwest, prices remained higher than a year ago. According to Redfin, the region with the largest home price increase was Florida in the South, with Fort Lauderdale and Boca Raton rising by 16.6% and 15.7%, respectively.

According to NAR, the median price of single-family homes nationwide was $371,200 (approximately 492 million KRW), down 0.2% from a year ago, indicating a minimal annual decline. During this period, the average mortgage payment for single-family homes was $1,859 (approximately 2.46 million KRW), a 33% surge compared to $1,397 a year earlier.

[Image source=AP Yonhap News]

The reason for the small decline in U.S. home prices despite the interest rate surge can be found in the mortgage loan structure. Most U.S. mortgages are fixed-rate rather than variable-rate products, making the loan structure in the U.S. housing market different from that in Korea.

While the rising rates since last year reduced demand for new home purchases, they did not affect the interest repayment burden of existing homeowners, preventing a flood of distressed sales and thus averting a sharp drop in home prices.

Meanwhile, WSJ analyzed that amid the pressure on housing demand caused by the mortgage rate surge, new supply has been limited due to factors such as rising raw material prices, leading to a significant decline in home transactions nationwide over the past year.

This content was produced with the assistance of AI translation services.