The Resurgence of US Home Prices: A Closer Look at Emerging Opportunities

In recent months, the US housing market has shown signs of recovery after a significant downturn in 2022. Home prices are now hovering just below their all-time highs, signaling a potential rebound. However, not all markets are experiencing this resurgence equally. Some of the hottest pandemic-era markets are still grappling with prices that remain significantly lower than their peaks. This presents a unique opportunity for savvy investors and homebuyers alike.

The Current Landscape of Home Prices

According to data from Redfin, home prices in several key markets have seen notable declines from their peaks in 2022 and 2023. For instance:

• Phoenix, Arizona: Down 14.7% since its peak in May 2022.
• Austin, Texas: Down 7% since its peak in May 2022.
• Provo, Utah: Down 14.1% since its peak in April 2023.

These figures illustrate a broader trend, particularly in the Western region of the United States, where many cities have seen prices decline in recent months. Despite this downturn, the fundamentals in these markets—such as wage growth and population increases—remain strong, suggesting that the potential for recovery is on the horizon.

Favorable Fundamentals: Wage and Population Growth

Dave Meyer, a housing market expert and real estate investor with BiggerPockets, emphasizes the importance of favorable economic indicators in these cities. According to government data compiled by LendingTree, wage growth in Phoenix, Austin, and Provo ranks among the top 20 in the nation. Here’s a closer look at the statistics:

• Provo: Median earnings increased by 11.7%.
• Austin: Median earnings rose by 14.4%.
• Phoenix: Median earnings grew by 12.5%.

In terms of population growth, Austin experienced a 2.7% increase between 2021 and 2022, while Phoenix recorded the second-highest net population gain in the country, adding over 19,000 new residents. Although Provo’s city limits saw a slight decline, its metropolitan area thrived, with Utah County experiencing a 5.9% growth from 2020 to 2022.

Recognizing Boomtowns

All three cities—Phoenix, Austin, and Provo—have been recognized as boomtowns by the National Association of Realtors, which highlights cities experiencing significant economic and population growth. Provo ranked first on the list, Austin came in seventh, and Phoenix was 21st. This recognition underscores the potential for these markets to rebound as they continue to attract new residents and businesses.

The Opportunity for Buyers and Investors

Meyer suggests that the combination of wage and population growth creates a favorable environment for home prices to rise. However, the current market dynamics indicate that sellers are still adjusting their prices downward, which could present a golden opportunity for buyers.

"This means all three markets SHOULD be primed for home prices to increase, BUT sellers are still dropping prices," Meyer noted. For those willing to wait and strategically navigate the market, there may be hidden opportunities to secure properties at lower prices.

Long-Term Investment Potential

For real estate investors looking to buy and hold properties for the long term, Meyer recommends focusing on these markets. Given the positive trends in wage and population growth, he believes that appreciation is likely to occur in the coming years.

With buyers currently holding the upper hand, it’s an opportune time to negotiate prices down further. Meyer advises potential buyers to seek out good deals and leverage the current market conditions to secure properties at favorable prices.

Conclusion

As the US housing market begins to recover, certain cities like Phoenix, Austin, and Provo stand out as potential hotspots for investment. While home prices in these areas are still below their peaks, the strong fundamentals of wage and population growth suggest a promising future. For buyers and investors willing to navigate the current landscape, there are opportunities to be found in these emerging markets. With careful consideration and strategic negotiation, the right property could yield significant long-term benefits.