The past five years have seen some pretty dramatic flip-flopping when it comes to real estate prices. After years of growth, demand for certain large cities dipped briefly during the pandemic as many looked toward the less-dense suburbs before climbing back up again as infection cases and restrictions eased.
Cities like Phoenix and many other parts of the South and the Midwest saw home prices spike by double digits in a single month amid an influx of people looking to move there but are now dealing with a market disproportionate to developer hype.
According to Realtor.com's annual round-up of cities with the most dramatic increases and drops in real estate values, the Midwest has been particularly prone to this type of flip-flopping -- while prices in Wichita, Kansas rose by 21.5% per square foot between December 2021 and 2022, they fell by 5.8% in Idaho's Boise.
"The run-up in prices in a place like Boise, where there was such an inflow of new buyers, was tremendous when you look at the size of the market or the local incomes," George Ratiu, a senior economist for Realtor.com, said in a statement. "The prices were out of alignment."
The Midwest Is Seeing Both Rising And Falling Prices
With a 21.6% year-over-year increase, Nebraska's Omaha tied Jackson for the city where prices are still rising the fastest. Over the last year, the birthplace of investment magnate Warren Buffett has been seeing an influx of buyers priced out of more expensive nearby cities like Denver and Chicago.
The price per square foot went from $149 in the middle of December to $181 two weeks ago but is still below the $212 average across the rest of the country. Similar factors drove 21.6% growth in Missouri's Jackson, 21.5% growth in Wichita, and 20.9% growth in Wisconsin's Milwaukee -- the lower-than-national-average prices have been attracting buyers priced out of other markets.
At the same time, the 5.6% drop seen in Boise led the city to the top of the list when it comes to price decreases. At one point, listing prices in 2022 were more than 70% higher than what was seen in 2020 and the city is now adjusting to a market that is more proportional to its size and economy.
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Dropping Prices Is (Mostly) Not A Reason For Alarm
Housing prices in Denver are down 5.7% while Sacramento, California took the third spot with a 3.1% decrease. As a median home still lists for $591,500, Sacramento is the most expensive city on the list but is now also seeing demand adjusted from popularity during the pandemic.
"These are destinations for people who were fleeing high-cost urban cities," Ratiu said in the report. "It's the natural reaction to the sharp run-up in prices over the past couple of years now meeting the new, higher mortgage rates this year."
New Orleans and Chicago are two metropolises that break away from the trend of smaller cities recovering from a brief burst of popularity. Both cities are still seeing strong demand but prices per square foot dropped by a respective 2.7% and 1.6% as prices adjust from the abnormally high ones seen a few months ago -- for investors, they may be the safer bet as their diversified economies make these cities likely to see strong demand for years to come.
SEE THE FULL LIST OF CITIES WITH THE MOST DRAMATIC REAL ESTATE RISES AND DROPS HERE.
