The 2022 dip was milder than in Australia, Canada, New Zealand and the U.K.
The global housing market has been in a slump since mid-2022. In the first half of 2022, central banks all over the world began raising rates, which dampened the record home price growth recorded since 2020.
Home prices in New Zealand peaked in mid-2022 but by June 2023 had dropped by 13% (and counting). Canada and Australia recorded 9% declines at the same time. Home prices in the U.S. and U.K dropped too but never fell by more than 4% in either country.
Figure 1 and Figure 2 show that these five countries’ housing markets followed a similar path on the upswing. All experienced major price growth at the beginning of the pandemic, and all saw prices plateau in the first half of 2022.
New Zealand saw the biggest such boom, with prices rising by 46% from January 2020 to March 2022. The U.S. and Canada closely followed with 41% and 37% increases, respectively, from January 2020 to June and April 2022. Home prices in Australia rose by 28%, peaking in April 2022, while U.K. prices were the last to reverse course, reaching a 26% gain in November 2022.
Home Price Changes in Five Countries Since 2020
The post-2022 price trends across countries show somewhat different patterns, however. At first, all five nations experienced some drop. In New Zealand, the slide is still ongoing, with a decline of 13% as of July 2023. The other nations have all reversed course: Australia prices fell by 9% but have increased by 4% since February; the U.K. declined by 3% but is now up by 2% and the U.S. decreased by 3% but has posted a 5% uptick since January. Currently, U.S. home prices are above their 2020 peak.
Post-peak price changes partially reflect the way interest rate increases affect global borrowers. For example, most U.S. mortgages have a fixed rate for the entire term, which limits the financial impact to only new buyers . In other countries, mortgage rates are adjusted every few years, meaning that most borrowers will be affected by changes .
The exclusive use of long-term, fixed-rate mortgages in the U.S. disincentivizes borrowers from selling their home, since interest rate hikes mean that they cannot easily trade up for a similar property. This is the one of the primary reasons that U.S. housing inventory remains very low, and the supply-demand balance is skewed, since sellers are more willing to wait out the drops in demand from high interest rates.
Many other factors are at play, of course. Though the upswing from 2020 to 2022 is similar among the five countries, there was still a wide variation. The data indicates that supply-side factors are different in each country and that demand shock from a drop in interest rates could be less intense as well.
Similarly, in the post-peak period, inflation has varied among these countries, with the U.S. seeing a relatively lower increase, which may have helped homebuyers maintain their buying power. Furthermore, New Zealand is the only country where prices are still falling and has just entered a recession. The other countries have so far avoided such a downturn, which indicates that differences in larger macroeconomic trends are also factors.
Comparing Home Price Changes in Auckland, San Francisco and Sydney
Figure 3 examines indexes for the most expensive large metro areas in New Zealand (Auckland), the U.S. (San Francisco) and Australia (Sydney). The data shows a similar pattern of sharp increases in 2021 and 2022 and subsequent drops that are proportional to the 2022 gains. Though home prices in San Francisco have risen so far in 2023, that metro is still 10 percentage points below its peak. Identical mortgage rates are available across the U.S. regardless of location, so this should cast doubt on the idea that movements in 30-year, fixed-rate mortgages make markets invulnerable to price drops.
One such factor is simply the degree of urbanization. Auckland is a sprawling, high-priced coastal city with severe affordability problems, quite similar to some U.S. West Coast metros. However, while the San Francisco Bay Area makes up only around 2% to 3% of the U.S. population, Auckland accounts for 34% of New Zealand residents. So, besides mortgage trends, the urban makeup of a region also appears to play a role in global home price trends.
Overall, U.S. home prices seem to be defying gravity. New Zealand has seen the strongest appreciation and the largest fall. Canada has posted the third-highest appreciation and the second-biggest drop, and Australia and the U.K. were third and fourth, respectively. The extent of the downturn appears predictable based on recent appreciation trends in everywhere but in the U.S.
Stay current with the most recent U.S. housing market trends by regularly visiting CoreLogic’s Office of the Chief Economist’s blog home page.
Sources: Tim Lawless, Australian data; Nick Goodall, New Zealand data.
 “New buyers” includes both first-time homebuyers and existing homeowners buying another home
 Prepayment penalties are also standard