Hi! I’m Aziz. My newsletter contextualizes economic news using data visualization. These days I’m focusing more on housing—let me know what you think by replying to this email.

It’s not surprising that home prices have declined over the past year—they soared during the pandemic, and the Fed’s hikes have made mortgages more expensive. But a few aspects of the correction are worth noting:

Price falls have been tiny compared to the pandemic boom.
From July 2020 to August 2022, prices rose by almost 40%. Since then, they’ve only dropped by about 5%.

Prices have fallen in some areas way more than others.
Since the housing market peaked last August, homes in Austin are down 9%. Meanwhile, those in El Paso, Texas are up 4%.

Pandemic ‘zoomtowns’ fell the most.
Austin’s 9% drop was preceded by a 54% climb over the prior two years.

Unaffordable tech-cities have also fallen more than average.
New York (flat since August) and San Francisco (down 8%) are both expensive coastal cities, but the latter has been hit hard by the downturn in the tech sector.

Your first question when looking at a chart like this should be, is this normal? The answer is no, this is not normal—for a few reasons.

First, after a wild surge in price like we saw during the pandemic, and following the sharpest Fed hiking cycle in 50 years, you’d have expected prices to have fallen by more than they have. The pandemic surge in home prices was truly historic—the only time prices have risen by more was the massive housing bubble that led to tumbling prices and the Great Financial Crisis in 2008. The pandemic market boom also happened at twice the pace. Even after the recent decline, home prices are still 34% higher than they were in mid 2020.

Some reasons for the tepid decline in prices might include:

• Mortgage lock-in. Nobody wants to move and lose their cheap mortgages from the days of low inflation and low rates. As a result, housing inventory is extremely scarce.

• Still-high appetite for the places people migrated to during the pandemic. Perhaps some of this is mixed in with demographic factors—retirees and fleeing urbanites all seem to have gone to Florida. Price in Cape Coral rose by 62% and have only fallen by 5%. Prices in Miami are at all-time highs.

• An ongoing, if not intensifying, secular, lack of housing that has been widely documented by people like Matt Yglesias and Ezra Klein.

• Household finances are in good shape. Unemployment is incredibly low. People had excess savings leftover from fiscal stimulus during the pandemic. For what it’s worth, these buffers have now, apparently, been exhausted.

The second reason the recent moves in home prices are weird is that they have been so much more intense in some places than others. As Taylor Marr, an economist at real estate company Redfin has pointed out, price moves haven’t been this dispersed since the housing crash in 2008. We have been through some unusual times over the past few years, and the housing market is reflecting that.

What does seem deeply sensible about this correction is that the cities which lie below the trendline in the chart—those which have fallen by more than you’d expect based on their prior appreciation—are the ones where real estate prices had become the most stretched compared to local incomes, according to analysis by Redfin. These “unaffordable” metros are represented by the yellow dots.