As 6%+ mortgage rates and widespread economic uncertainty cool the U.S. housing market, homebuyer demand in relatively affordable Midwest and East Coast metros has held up better than any others. 

In fact, buyer demand is nearly as strong as it was earlier this year before mortgage rates doubled in June. 

So, where are these metros, and what do they have that cooling metros don’t? 

Redfin’s analysis

Redfin analyzed the 100 most populous U.S. metros to determine how quickly or slowly they were cooling, relying on changes in the following metrics from February 2022 to August 2022: 

  • Prices
  • Price drops
  • Supply
  • Pending sales
  • Sale-to-list ratio
  • Speed of home sales

The markets holding up best right now are the ones cooling the slowest. 

Midwest and East Coast metros holding up best

Taking the number one spot on the list of those slow-cooling metros is Lake County, Illinois, about 45 miles north of Chicago, followed by Albany, NY. 

Here’s the full list of the ten strongest markets: 

  1. Lake County, IL
  2. Albany, NY
  3. Chicago, IL
  4. New Haven, CT
  5. Milwaukee, WI
  6. New Brunswick, NJ
  7. Elgin, IL
  8. Bridgeport, CT
  9. Pittsburgh, PA
  10. El Paso, TX

Nine of those ten markets are Midwest or East Coast metros

In eight of these ten markets, the typical home costs less than the national median home sale price of $407,000. The exceptions are New Brunswick ($480,000) and Bridgeport ($590,000). 

Homes in places like Chicago and Milwaukee certainly got more expensive during the pandemic homebuying boom, but they’re still affordable compared with the rest of the country. They’re slow to feel the impacts of economic headwinds like inflation and the Fed raising interest rates because the relatively affordable home prices make them attractive to house hunters seeking deals, and homes are already priced low enough that there’s not much room to fall. These markets don’t have much volatility.

Sheharyar Bokhari

Redfin Senior Economist

Chicago vs. Seattle

With mortgage rates around 6%, markets with relatively low home prices are more attractive. The lower the sale price, the lower the impact on the buyer’s monthly mortgage payments. 

Chicago’s median sale price, for example, is $310,000. The typical monthly mortgage payment for that price, with a 30-year fixed rate of 6%, is $2,000. 

That’s $400 more than the $1,600 payment based on a 3% mortgage rate but considerably less than the $1,100 monthly payment increase for the typical home in Seattle, where the housing market is cooling faster than any other U.S. metro. 

Nearly all housing markets cooling the fastest are West Coast metros. Many of which are notoriously pricey, and some of which saw their markets heat up quickly during the pandemic, only to cool as their popularity drove up housing prices.  

Homebuyer demand in slow-cooling markets

Places like Illinois and upstate New York haven’t seen as much cooling in homebuyer demand. Lake County, IL, where the typical home sells for around $315,000, saw roughly 36% fewer homes selling within two weeks in August compared to a year earlier, less than February’s year-over-year decline of 43%. 

The year-over-year increase in median price per square foot for Lake County was 9% in August, smaller than February’s 16% annual gain (though still significant). 

These numbers suggest buying power in the area—as well as home sales and housing prices—are holding relatively steady. 

Top takeaways for real estate agents

Plenty of buyers are still out there looking for homes. Some couldn’t compete in last year’s buying frenzy and are relieved to see fewer bidding wars and lower prices. 

Some buyers are willing to buy a home in spite of rising mortgage rates because they finally have a chance at getting their offer accepted. Fortunately for them, plenty of sellers out there are motivated to list their homes because they worry about declining home values.  

That said, more deals are likely to fall through this year compared to last. Sellers wanting the same price their neighbors got in the spring may not accept lower offers. And buyers are more willing to walk away if they run into issues with the house or financing. 

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