Home Prices Are Dropping Fastest in These 10 Cities

Home sales in U.S. cities have been dropping sharply as mortgage rates surged in the past few months, leading to property prices finally starting to cool down all across the country.

Annual growth in home prices had peaked at 21 percent in April 2022 and has since then been decelerating. According to the S&P Case-Shiller index, which measures home prices in 20 American cities, price growth slowed down in the months of June and July—and in August (the latest data available) when all 20 cities reported declines.

In the short period of time between June and August, home prices, inflated by two booming years for the national housing market, have decreased significantly more in the west of the U.S., where major cities have been experiencing the steepest drops in prices.

These are the 10 cities that saw the biggest month-on-month declines in home prices as of August 2022, according to the S&P Case-Shiller index released on October 25:

1. San Francisco (-4.3 percent)
2. Seattle (-3.9 percent)
3. San Diego (-2.8 percent)
4. Denver (-2.3 percent)
5. Los Angeles (-2.3 percent)
6. Phoenix (-2.1 percent)
7. Dallas (-1.9 percent)
8. Portland (-1.9 percent)
9. Washington (-1.5 percent)
10. Boston (-1.2 percent)

"The biggest price declines were in San Francisco, Seattle, and San Diego," Craig J. Lazzara, managing director at S&P Dow Jones Indices, told Newsweek. "Do you see one thing that all those cities have in common? They're all on the coast."

It's also not a coincidence that home prices are dropping the fastest in the most unsustainable markets in the country. San Francisco, for example, remains among the most expensive home market in the U.S. (second only to San Jose, California), even as prices have been dropping for five consecutive months as of October.

In October, the average sale price of a home in the city was $1.42 million, down 6.7 percent year-on-year.

In San Diego, the median home price has been decreasing for the fifth consecutive month in October, after reaching an all-time high of $850,000 in May.

Higher mortgage rates are mostly responsible for the drop in demand and sales, which is leading the nationwide market to cool down. But Lazzara said he suspected that these changes might have something to do with people moving out of the big cities during the pandemic, and this phenomenon now being partially reversed as offices have widely reopened.

"Because of the shutdowns around the pandemic, everybody started working remotely. And some people figured out that, if they could work remotely, they didn't have to live in New York or Chicago," he said.

"One of the things remote work offers is that you don't necessarily have to live near the place where your office is anymore. And to the degree that people are able to take advantage of that, they prefer warmer weather and lower taxes—and in that case it's Tampa, Florida, Phoenix, Arizona, Dallas, Texas and Charlotte, North Carolina, who benefit."

"Remote workers were really working against San Francisco early on in the pandemic," Mark Zandi, chief economist at Moody's Analytics, told Newsweek.

"But now the outflow from San Francisco has slowed very sharply. We're starting to see the return of people to San Francisco as office towers have reopened in the city. But San Francisco is also under some pressure because of tech, as the tech industry is laying off workers. And that's taking some steam out of those housing markets."

As prices cool down the quickest in some of the most expensive cities in the country, they remain high, and, for many, unaffordable—especially as higher interest rates now call for bigger monthly payments.