Potential Risks of Price Declines in the Real Estate Market

With home prices continuing to reach new highs and the market showing few signs of slowing in most of the country’s metropolitan areas, questions surrounding rising housing market risks are top of mind for many.

In 2021, home price growth surged to a 15% annual increase from 2020. This is triple the average rate seen in the decade prior. Although home price gains are expected to slow in 2022 and average a little less than 10% growth for the year, the recent rapid acceleration in prices has led to overvaluations in some markets, therefore pushing up the risk of price decline in the year ahead.

First, however, let’s take a look at the relationship between home price growth and the share of metropolitan areas with price declines.

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