There are now 210 U.S. housing markets at risk of 15% to 20% home price declines, says Moody’s

We’re beyond questioning whether the housing correction will push home prices lower. Falling home prices are already here. Heading forward, there are just two big questions: How many regional housing markets will see home price declines? And how far will those markets fall?

Moody’s Analytics chief economist Mark Zandi tells Fortune he expects national home prices to decline up to 5% from peak to trough. That assumes no recession. If a recession hits, Zandi expects a 5% to 10% national home price decline.

But that’s nationally. In some parts of the country this ongoing home price correction—which Moody’s Analytics doesn’t expect to bottom out for another 12 to 18 months—is expected to be much steeper. In “significantly overvalued” housing markets, Moody’s Analytics expects 5% to 10% home price declines. If a recession hits, Moody’s Analytics expects home prices to decline between 15% to 20% in those “significantly overvalued” housing markets.

Every quarter, Moody’s Analytics assesses whether local economic fundamentals, including local income levels, can support local house prices. If a housing market is “overvalued” by more than 25%, Moody’s Analytics deems it “significantly overvalued.” Back in the first quarter of the year, 183 of the nation’s 413 largest regional housing markets were overvalued by more than 25%. But this week, we learned that that figure grew to 210 regional housing markets in the second quarter of 2022.*

Simply put, over half of the nation’s largest regional housing markets are vulnerable to home price declines of 15% to 20%. For perspective: Peak to trough, U.S. home prices declined 27% between 2006 and 2012.

These 210 “significantly overvalued” housing markets include places like Boise (overvalued by 72%), Charlotte (overvalued by 66%), Austin (overvalued by 61%), Las Vegas (overvalued by 59%), and Phoenix (overvalued by 57%).

The pandemic saw a perfect storm hit markets like Austin and Phoenix. Not only did these markets get blindsided by the pandemic’s work-from-home revolution, which attracted hordes of expats from California and New York, but they also saw a flood of investor buying. These investors, often flippers or landlords, wanted in on historically low mortgage rates and record home price appreciation.

Underlying housing fundamentals tell us that many locals, in places like Austin and Phoenix, were already priced out even before we entered 2022. But now that mortgage rates are spiking, many of the would-be WFH buyers—who were attracted to markets like Boise because of their relatively affordable real estate—are also priced out. Cue steep price cuts in markets like Phoenix.

Falling home prices might be exactly what housing markets like Las Vegas and Boise need in order to get going again. At least that’s according to Rick Palacios Jr., head of research at John Burns Real Estate Consulting.

“The longer that [mortgage] rates stay elevated, our view is that housing is going to continue to feel it and have this reset mode. And the affordability resetting mechanism right now that has to happen is on [home] prices. And so there are a lot of markets across the country where we’re forecasting that home prices are going to fall double digits,” Palacios tells Fortune.

*”The Moody’s Analytics housing valuation measure is the percent difference between actual house prices and house prices historically consistent with wages and salaries per capita and construction costs. The price of a house is ultimately determined by the value of the land upon which it resides which is tied to the opportunity cost of the land as measured by wages and salaries, and the cost to build the home.

Nationwide, approximately one-half of a home’s value is the land and the other half the structure, but this varies considerably across the country.  In San Francisco, for example, the land is far and away the biggest part of the home’s value, while in Des Moines, Iowa, it is the opposite. Our housing valuation measure accounts for these differences,” writes Moody’s Analytics chief economist Mark Zandi.