Sun Belt Home Prices Are Softening, but Mortgage Rates Are Taking Back the Savings
Home prices are declining in key Sun Belt markets including Tampa and Phoenix, but rising mortgage rates are limiting affordability gains for buyers.
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For homebuyers who spent the past few years waiting for prices to cool in some of America’s hottest Sun Belt markets, that moment may finally be arriving.
The problem is that borrowing money to buy those homes is getting more expensive again.
Home prices are now lower than a year ago in several former boom markets, including Tampa, Phoenix and Dallas, while increases have slowed sharply in places such as Atlanta and Charlotte. But mortgage rates have been moving in the opposite direction, threatening to erase much of the relief buyers expected from softer prices.
The average 30-year fixed mortgage reached 6.76% on Sept. 10, according to Freddie Mac, up from 6.49% in early July and 6.35% at the same time last year.
That leaves the Sun Belt housing market in an unusual position: sellers are losing some of the extraordinary pricing power they enjoyed during the pandemic boom, but buyers still may not feel that homes have become meaningfully more affordable.
Prices are finally cooling in former boom markets
The shift is clearest in some of the cities that experienced the fastest population growth and sharpest home-price increases earlier in the decade.
The latest S&P Cotality Case-Shiller data, covering June, showed home prices down 1.19% from a year earlier in Tampa, 0.88% in Phoenix and 0.66% in Dallas. Las Vegas prices were down 1.9%.
Other major Sun Belt markets were still rising, but only modestly. Charlotte was up 0.52% from a year earlier and Atlanta just 0.27%. Miami remained stronger, with prices up 2.27%.
Nationally, home prices increased 1.52% from a year earlier, according to S&P Dow Jones Indices.
Those numbers are a major change from the pandemic-era housing market, when double-digit annual gains were common and buyers frequently competed for homes with multiple offers.
Inventory has increased in many Southern and Western markets, builders have continued adding homes, and buyers have become more selective. Yet falling or flat prices do not automatically translate into cheaper monthly payments.
The mortgage payment is becoming the problem
A buyer purchasing a $400,000 home with 20% down would borrow $320,000.
At a 6.35% mortgage rate, roughly where the national average stood a year ago, principal and interest would be about $1,991 a month.
At 6.76%, that payment rises to about $2,078.
That is roughly $87 more each month, before property taxes, homeowners insurance and association fees are added.
In parts of Florida and other high-growth Sun Belt markets, insurance and property-tax costs can make the affordability calculation even harder.
A modest reduction in the sale price can therefore disappear quickly when borrowing costs rise.
Hopes for much cheaper mortgages are fading
The latest outlook suggests buyers may not get substantial rate relief soon.
A Reuters survey of housing analysts published Tuesday found mortgage rates are expected to average about 6.60% next quarter and 6.52% in the following quarter.
Those forecasts are higher than economists expected only a few months ago.
The change comes as the yield on the 10-year U.S. Treasury, one of the strongest influences on mortgage rates, moved above 5% this week for the first time since 2023.
Higher Treasury yields can push borrowing costs upward across the economy, including mortgages, auto loans and business financing.
The Reuters housing survey also found economists expect national home-price growth to remain relatively weak, with the Case-Shiller 20-city index projected to rise about 1.5% in 2026 and 2.3% in 2027.
That sounds encouraging for buyers after years of rapid appreciation. But affordability depends on both the price of the house and the price of the money used to buy it.
A very different Sun Belt housing market
The change is particularly important across the Sun Belt because many of its biggest cities entered the decade as symbols of America’s housing boom.
People moved to Texas, Florida, Arizona, Tennessee and the Carolinas in large numbers, often seeking lower costs, warmer weather and more space.
Builders responded with enormous amounts of new construction. Prices climbed quickly. Now some of those markets are moving closer to balance.
Buyers have more choices. Sellers may need to negotiate. Builders frequently offer incentives, including mortgage-rate buydowns and closing-cost assistance.
What has not returned is the inexpensive financing that helped fuel the earlier boom. That may leave the housing market stuck between two eras.
The bidding wars and relentless price increases are fading in many places, but the monthly payment remains difficult for households whose incomes have not risen nearly as quickly as housing costs.
For buyers in Tampa, Phoenix, Dallas and other cooling Sun Belt markets, the encouraging news is that the asking price may finally be negotiable.
The less encouraging part is that the mortgage still may not be.
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