A spooky house with stormy skies above.

Read if you dare: The scariest housing markets in the country 

A Point2 analysis says California is all tricks and no treats for homebuyers facing the bogeymen of high prices, low inventory and rising mortgage rates.

October 31, 2023
3 minutes

Key points:

  • Of the top 10 "scariest" markets for buyers, 8 were located in California.
  • "Silicon Valley is probably the hardest place in the nation to buy," said an area agent.
  • The Southeast offered some of most buyer-friendly markets.

Forget ghouls and goblins. The scariest specters in real estate this year are the Ghost of Interest Rates Past — and the Ghost of Interest Rates Present.

One ghoul is keeping homeowners from selling because they don't want to lose their ultra-low interest rates. The other is keeping would-be buyers from qualifying for the few homes that do hit the market.

And nowhere in the country is being haunted quite like California, according to a report by real estate search portal Point2. In anticipation of Halloween, Point2 set out to see which markets have the biggest tricks for homebuyers, and if there are any treats to be had.

The company analyzed the 200 largest housing markets across four scary metrics for homebuyers: median price, year-over-year difference in home price, year-over-year difference in for-sale inventory, and fewest days on the market.

While Buffy the Vampire Slayer worked overtime to protect her fictional town of Sunnydale from demons, the similarly named but very real town of Sunnyvale ranked as the scariest place for homebuyers, according to the report.

The median sale price of homes in Sunnyvale, located in California's Silicon Valley region, is more than $1,744,250. And while that's enough to cause a scare, prices are up a spine-chilling 11% from 2022, according to Point2, while inventory is down a shocking 60.2%. Only two markets outside of California  — Bellevue, Washington, and the borough of Manhattan in New York City — cracked the top ten for highest prices.

Bay Area, Silicon Valley offer no treats for buyers

"As a whole, Silicon Valley is probably the hardest place in the nation to buy," said Ken DeLeon, founder of DeLeon Realty in Palo Alto. "There are so many disincentives to sell a home in California."

DeLeon cites California's capital gains tax and the effects of 1978's Proposition 13, which limits property tax increases to 2% a year, based on the year the home was bought. Add the frightful number of homeowners sitting on mortgage rates less than half of what they are today, and it's an unsettling place for buyers.

"We're going to have terrible rates for the next 18 to 24 months," DeLeon said. "It's hard to even qualify. … It's scary for the homebuyers."

But buyers who can qualify shouldn't be paralyzed by fear. "Once you get in, Silicon Valley is very resilient to downturns," he said. "It's hard to see how you can lose money. If you can afford to buy a home now you should. … The spooky scary market now will only continue to get worse."

Meanwhile, there are plenty of jump-scares for buyers elsewhere in the country. Some of the more affordable large markets saw the highest price jumps. Louisville, Kentucky, tops that list with the median home price soaring 25.1% since last year.

Southeast has some sweet spots

As promised, it's not all tricks or doom and gloom in the report. Median home prices declined or stagnated in 60 major markets. Just like a kid hunting for those elusive full-size candy bars, buyers looking for treats need to know where to look.

The Southeast is the region with the most un-frightful markets for buyers, with Jackson, Mississippi; Birmingham, Alabama; and New Orleans ranked as the least scary markets in 2023.

In Birmingham, home prices dropped about 21%. Meanwhile, New Orleans inventory has risen like the hair on the back of a black cat, with 55% more homes for sale this year.

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