When a buttoned-up Fed economist says the U.S. housing market has entered into a “difficult [housing] correction”, it’d be wise to believe them. When it comes from the lips of Fed Chair Jerome Powell, it’s more of a warning.

Powell is right: Not only does housing activity continue to plummet, but U.S. home prices are falling for the first-time since 2012.

Unlike the 2000s housing correction, which saw U.S. home prices fall 27% between 2006 and 2012, this ongoing housing correction isn’t underpinned by bad loans nor by a supply glut. Instead, this correction is driven by what Fortune calls “pressurized affordability.” The Pandemic Housing Boom‘s 43% run-up in U.S. home prices combined with spiking mortgage rates has simply pushed affordability beyond what many borrowers can stomach.

The only levers available to depressurize affordability are for either mortgage rates or home prices to fall. In recent months, we’ve seen the latter.

“Home prices continue to face significant pressure in light of surging costs of borrowing,” Selma Hepp, deputy chief economist at CoreLogic, tells Fortune. “[The] considerable pullback in home buyer demand will continue to weigh home prices down, bringing them closer in line with local incomes.”

Nationally, home prices are down 1.3% from their 2022 peak. At least that’s according to the lagged Case-Shiller reading through August. However, markets like Austin and Reno are down 10.2% and 8.4%, respectively, while markets like Des Moines and Baltimore remain at their all-time highs. (Here’s the shift in the nation’s 400 biggest markets.)

But what’s coming next?

To better understand where regional home prices might go in 2023, Fortune reached out to CoreLogic to see if the firm would provide us with its updated November assessment of the nation’s largest regional housing markets. To determine the likelihood of regional home prices dropping, CoreLogic assessed factors like income growth projections, unemployment forecasts, consumer confidence, debt-to-income ratios, affordability, mortgage rates, and inventory levels. Then CoreLogic put regional housing markets into one of five categories, grouped by the likelihood that home prices in that particular market will fall between September 2022 and September 2023. Here are the groupings the real estate research firm used for the November analysis:

• Very high: Over 70% chance of a price dip
• High: 50%-70% chance
• Medium: 40%-50% chance
• Low: 20%-40% chance
• Very low: 0%-20% chance

Of the 392 regional housing markets that CoreLogic measured, zero markets currently have “very low” odds of falling home prices over the coming 12 months. Another 6 housing markets are in the “low” group and 33 markets are in the “medium” group. Meanwhile, CoreLogic put 65 markets in the “high” camp and 289 markets in the “very high” odds camp.

The trajectory is clear: The list of U.S. regional housing markets barreling towards a negative year-over-year home price reading is getting bigger. To see the shift, just compare CoreLogic’s November 2022 assessment (see chart above) to its May 2022 assessment (see chart below).

The November assessment finds 354 markets have a greater than 50% chance of notching a negative year-over-year reading (i.e. markets in either the “high” or “very high” risk groups) over the next 12 months. That’s up from 335 markets in October that had a greater than 50% chance of falling home prices. In August, there were 125 markets at risk. In July, there were 98 markets at risk. In June, 45 markets were at risk. And in May, just 26 markets (see chart above) fell into those “high” or “very high” risk camps.

What’s going on? The home price correction continues to spread.

It didn’t take long for Bay Area techies in 2020 to realize their newfound remote freedoms, coupled with historically low mortgage rates, made the pandemic the perfect time to buy in “Zoomtowns” like Boise.

At first, it didn’t matter that the Pandemic Housing Boom had made Boise home prices significantly detached from local incomes. Well, that was until spiking mortgage rates disrupted the math of selling one’s home in Santa Clara and moving to Boise. Once that migration slowed, Boise quickly entered into a historically sharp correction.

The correction is so sharp that Boise—which saw its year-over-year rate peak at 47% between July 2020 and July 2021—has already gone negative in 2022 on a year-over-year basis. Indeed, Boise home prices are down 7.1% since its 2022 peak, and down 4.3% on a year-over-year basis.

To date, only 1% of the nation’s 392 biggest housing markets are negative on a year-over-year basis. That said, don’t ignore Boise. The big question: are markets like Boise only correcting because their fundamentals got so out-of-whack? Or are markets like Boise just correcting first because their fundamentals got so out-of-whack? The analysis provided by CoreLogic—which finds 354 markets are at “high” or “very high” risk of posting a negative year-over-year reading in September 2023—suggests that it could be the latter.

Want to stay updated on the housing correction? Follow me on Twitter at @NewsLambert.

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