As rising mortgage rates continue to put pressure on the U.S. housing market and the entire economy, economists and housing researchers are seeing early signs of a cooling market — but a question remains.

Is a widespread correction coming to what has been now over two years of extraordinary home price acceleration? And if so, what would that correction look like?

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The answer to that question likely depends on regional housing markets, with certain areas at more risk for price drops — and not just price growth deceleration — than others.

That’s according to a recent analysis from Fortune, which used data from the real estate research firm CoreLogic to publish an interactive chart showing levels of “risk” regional housing markets face for price drops.

Fortune’s analysis shows parts of the West vary from “very low” risk of regional home price drops over the coming year to some areas that are “very high risk.”

Let’s dive in.

What’s Utah’s risk level?

All five of Utah’s housing markets included in the Fortune/CoreLogic analysis are classified as “very low” risk of seeing home price drops: Logan, Ogden-Clearfield, Salt Lake City, Provo-Orem and St. George at the south end of the state.

The analysis aligns with what local experts have been saying about Utah’s housing market, which was grappling with a housing shortage even before the COVID-19 pandemic sent the national housing market into a frenzy.

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The big picture: Over the past two years, as many Americans reevaluated their lives amid the pandemic, Utah’s already rising home prices shot even higher. In the past two years alone, Salt Lake County’s home prices have gone up by 50%, according to the Salt Lake Board of Realtors.

Utah remains among one of the fastest-growing states in the nation. Homegrown Utahns continue to make up a bulk of the state’s growth, but particularly in the past year, in-migration has begun to be a larger contributor.

Today, Utah’s housing shortage has only gotten worse. Housing experts say it’s creating a “severe” imbalance, which is fueling the state’s housing affordability crisis. So long as demand continues to outpace supply — and so long as Utah continues to enjoy a strong job economy — housing experts say it’s hard to fathom a “bubble” burst or home price drops on Utah’s horizon.

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What does ‘low risk’ mean?

The “very low” classification means the Fortune/CoreLogic analysis puts these Utah housing markets at the lowest-risk category of seeing home prices drop within the next 12 months. More specifically, CoreLogic says there’s a 0% to 20% chance of those areas seeing price dips within the next year.

In order to determine levels of risk, CoreLogic “assessed factors like income growth projections, unemployment forecasts, consumer confidence, debt-to-income ratios, affordability, mortgage rates and inventory levels,” Fortune reported. Then, CoreLogic “put regional housing markets into one of five categories, grouped by the likelihood that home prices in that particular market will fall over the coming 12 months.”

  • The “very high” risk classification means those areas have an over 70% chance of a housing price dip.
  • “High” means there’s a 50% to 70% chance of price drops.
  • “Medium” means there’s a 40% to 50% chance.
  • “Low” means there’s a 20% to 40% chance.
  • “Very low” means there’s a 0% to 20% chance.

Why it matters: Fortune reported the “odds of a home price correction just spiked” because CoreLogic’s May analysis found higher chances of markets seeing price drops when compared to the April analysis.

  • “When CoreLogic analyzed the housing market in April, the company found the average market had a 13% chance of experiencing a home price drop over the coming 12 months,” Fortune reported. “Now, CoreLogic says the average regional housing market has a 28% chance of a price drop over the coming 12 months. That’s a 15 percentage point spike in just a one month period.”

Why the big spike? CoreLogic researchers point to “surging mortgage rates, declining consumer confidence, and home price overvaluation,” Fortune reported.

Yes, but: “While CoreLogic finds the odds of a home price correction are rising, it still believes nationwide home prices will inch higher over the coming year,” Fortune reported. “Between March 2022 and March 2023, CoreLogic predicts U.S. home prices will rise another 5.9%.”

What areas are high risk?

Two regional housing markets in Arizona have a “very high” likelihood of a price drop, according to the Fortune/CoreLogic analysis:

  • Prescott Valley, Arizona.
  • Lake Havasu City-Kingman, Arizona.

Two other markets (one closer to the West Coast and one on the East Coast) also have a “very high” likelihood of price drops:

  • Bend, Oregon.
  • Bridgeport, Connecticut.

Two other major Western housing markets — both in a state that’s topped national lists for its shocking home price growth throughout the COVID-19 pandemic — is classified high risk:

  • Boise, Idaho.
  • Coeur D’Alene, Idaho.
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What’s happening in Idaho? As Boise’s market has boomed over the past two years as a top spot to buy larger homes at more affordable price points, national researchers have eyed it as one of the nation’s top “overvalued” markets.

However, some areas in both Idaho and Arizona aren’t as at-risk for price drops, according to the Fortune analysis.

Both Idaho Falls and Pocatello are classified as “low risk,” same as the Utah housing markets directly to the south. In Arizona, the Flagstaff, Phoenix and Tucson areas are also “low risk,” according to CoreLogic’s data.

Correction: An earlier version incorrectly stated Utah’s housing supply outpaces demand. Demand continues to outpace supply.