With the Federal Reserve raising its benchmark interest rate nine consecutive times in the past 12 months, the housing market has begun to cool in many areas across the country. The Federal Funds rate — the interest rate banks charge each other for overnight lending — now sits at just under 5%.
Homeowners with adjustable rate mortgages (ARMs) and potential homebuyers are likely to find escalating interest rates most burdensome. Meanwhile, home sellers may find their properties sitting on the market for weeks or months longer than comparable homes did just a year ago.
But homeowners have even more on their minds than rising interest rates and falling home values, a recent Insurify poll discovered. They’re also worried about making their mortgage payments and how climate change will affect their home values in the future.
Table of contents
- Home values in the West are declining
- Home buying in major metro areas is slowing down
- New homeowners are already upside down on their mortgages
- Homeowners fear climate change will drive devaluation
- More Americans are moving south — mainly to Texas and Florida
- Get more insights on real estate, homeownership, and home insurance
Home values in the West are declining
The year-over-year upward trajectory of home values slowed by 15% in 2022. And while home prices still rose an average of 11% overall last year, certain western states actually saw home values begin to decline in the last six months of the year.
The tech implosion and the ability to work remotely in more affordable locations are driving devaluation in states that previously had robust markets, says Susan M. Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania. However, Watcher says, there’s likely good news.
Are home values declining too quickly?
Susan M. Wachter
Albert Sussman Professor of Real Estate, Professor of Finance at the Wharton School of the University of Pennsylvania, Wharton School of the University of Pennsylvania
“[Depending on the future of the economy], I do not expect prices to decline precipitously across the U.S. as a whole.”
| State | Home Value Depreciation (June-Dec. 2022) |
|---|---|
| Nevada | -6% |
| Arizona | -5% |
| California | -4% |
| Utah | -4% |
| Idaho | -3% |
| District of Columbia | -3% |
| Washington | -2% |
| Colorado | -2% |
| Oregon | -2% |
Home buying in major metro areas is slowing down
As inflation ballooned and mortgage rates rose, home buying slowed in many major metropolitan areas across the country. Even in cities that had the most home sales in 2022 — like New York, Chicago, Miami, Atlanta, and Philadelphia — the rate of home buying was down substantially from the year before.
While home buying declined more than 23% in those cities, Winston and Greensboro, both in North Carolina, saw the largest drops — 59% and 58%, respectively.
Cities with the most home sales
Metropolitan areas in the West saw some of the sharpest drops in home buying, making up more than 50% of the cities with the largest drops from 2021 to 2022. Namely, Las Vegas, Provo, San Jose, Seattle, and San Diego saw the biggest declines, at an average drop of around 30%.
| City | Drop in Home Buying 2021–2022 |
|---|---|
| Winston, NC | -59% |
| Greensboro, NC | -58% |
| Wichita, KS | -41% |
| Albany, NY | -36% |
| North Port, FL | -34% |
| Milwaukee, WI | -34% |
| Las Vegas, NV | -32% |
| Provo, UT | -32% |
| San Jose, CA | -31% |
| Chicago, IL | -30% |
| Seattle, WA | -30% |
| Bridgeport, CT | -30% |
| San Diego, CA | -29% |
| Los Angeles, CA | -29% |
| Riverside, CA | -29% |
| San Francisco, CA | -29% |
| Tucson, AZ | -29% |
| Salt Lake City, UT | -28% |
| Stockton, CA | -28% |
| Austin, TX | -28% |
New homeowners are already upside down on their mortgages
Insurify polled Americans across the country to learn their greatest homeownership concerns. Of those polled, 69% shared varying degrees of concern about becoming upside down on their mortgages. Of that group, 31% say they already owe more than the houses are worth.
Overall, a quarter of all respondents are already upside down on their mortgages.
Despite concerns over negative equity, 68% of new homeowners who bought their houses within the past 12 months said they think they bought at the right time, but 25% wished they’d bought sooner.
Important Information
Home values are a significant factor in home insurance rates. Higher home values typically equate to higher insurance premiums.
Homeowners fear climate change will drive devaluation
More than three-quarters of poll respondents expressed varying degrees of concern that climate change could affect their home values in the future. And nearly 45% said it already has.
While lower housing prices historically mean lower home insurance rates, that’s likely not the case in areas already affected by climate change.
In fact, homeowners who live in areas at high risk of natural disasters like floods, hurricanes, and wildfires pay nearly 2.5 times more for home insurance than those who live in low-risk areas, according to Insurify’s analysis of Quadrant home insurance rates and FEMA’s assigned risk ratings. Annual home insurance premiums rise $24 for every 1-point increase in a county’s FEMA risk index score (scaled 0–100).
Climate change contributes to increasing prices in high risk areas.
Sam Eckhouse
Principal of ClimateCheck, ClimateCheck
“As we see a higher frequency of climate-related catastrophic events — wildfires, storms, floods, etc. — insurers will have no option but to price in the increased risk. That means higher insurance premiums for homeowners, especially if they live in a high-risk area and they have not taken steps to mitigate the risk of damage or loss.”
More Americans are moving south — mainly to Texas and Florida
The millions of Americans who migrated south in 2022 likely drove home buying in states like Texas and Florida — the two states that saw large population increases last year. Attractive weather and relatively affordable housing and living conditions have likely contributed to southward migration.
“The South has become the ‘Great Attractor’ of the newly mobile population,” Wachter says.
States with the most increases in population
More than 1.3 million Americans moved to southern states between 2021 and 2022, an increase of 1.1%. Meanwhile, despite historically higher home prices, Florida had the biggest percentage increase in its population, with a 1.9% increase. The following table shows the 10 states with the most population growth.
States with the largest decreases in population
People moving south had to come from somewhere, and some northern states marked statistically significant population losses. In fact, overall the Northeast saw a total population decline of 0.4%.
New York had the biggest population drop, at 0.9%. Interestingly, the second-largest decline was in Louisiana, at 0.8% — the only southern state to see its population shrink in 2022. The following table shows the states with the largest population decreases in 2022.
| State | 2021 Population | 2022 Population | Percentage Loss |
|---|---|---|---|
| New York | 19,857,492 | 19,677,151 | 0.9% |
| Louisiana | 4,627,098 | 4,590,241 | 0.8% |
| Illinois | 12,686,469 | 12,582,032 | 0.8% |
| West Virginia | 1,785,526 | 1,775,156 | 0.6% |
| Hawaii | 1,447,154 | 1,440,196 | 0.5% |
| Oregon | 4,256,301 | 4,240,137 | 0.4% |
| Pennsylvania | 13,012,059 | 12,972,008 | 0.3% |
| California | 39,142,991 | 39,029,342 | 0.3% |
| Mississippi | 2,949,586 | 2,940,057 | 0.3% |
Get more insights on real estate, homeownership, and home insurance
Insurify’s Insuring the American Homeowner report examines trends in homeownership, home values, and home insurance throughout 2022 and forecasts what could be ahead in 2023. The report examines how climate change is shaping the American home buying and home insurance markets, and homeowners’ insurance experiences, concerns, and claims.
The report is available to download for free.
Insuring the American Homeowner 2023
Editor-in-Chief, Director of Content
