The US housing market gained a huge $2 trillion over the last year, amid a historic shortage of homes for sale.
The average home rose more than $20,000 and is now valued at $495,183 as of December 2023, up from $474,740 a year earlier.
According to Redfin analysis of more than 90 million homes across the country, the total value of US residential real estate increased 5.3 percent from a year earlier to $47.5 trillion in December.
While soaring mortgage rates mean housing demand is sluggish, home values continue to rise, pricing many Americans out of the market.
In the last two years, the housing market has gained $5.6 trillion, Redfin found.
However a disparity remains across the US. While affordable East Coast and Midwest metros saw the biggest rise in home values in the last year, so-called pandemic ‘boomtowns’ have seen the largest decline.
The average home rose more than $20,000 and is now valued at $495,183 as of December 2023. The biggest rises were on the east coast of America
Scroll down for the full list of metros with the biggest price rises.
According to Redfin, there are three major reasons why home values are continuing to rise.
Many homeowners are locked into ultra-low mortgage rates from previous years, meaning they are hesitant to put their houses on the market.
With supply tighter than demand, buyers are competing for a limited pool of homes. That is propping up values for both properties that are already for sale, and those that could hit the market in the future.
The total value of US homes was nearing a trough at the end of 2022, which is part of the reason year-over-year growth at the end of 2023 was so large, it added.
It is typical for home values to cool in the winter, but they experienced an abnormally large slowdown in 2022 as the shock of surging mortgage rates sent a freeze through the housing market.
While America grapples with a housing shortage, it is also continuing to build homes, which contributed to the gain in total home values last year, Redfin said.
Home values in Newark, New Jersey, saw the biggest gain in value in the year to December 2023 – increasing by 12.8 percent to $359.6 billion.
Next come two other East Coast metros, New Haven, Connecticut, and Camden, New Jersey. Homes in New Haven gained 11.9 percent in value to $86.5 billion, while properties in Camden went up by 10.8 percent to $153 billion.
Home values in Newark, New Jersey , saw the biggest gain in value in the year to December 2023 – increasing by 12.8 percent to $359.6 billion
Fixed 30-year mortgage rates are now hovering around 6.9 percent, according to Government-backed lender Freddie Mac
Charleston, South Carolina, ranked fourth – with values increasing by 10.8 percent to $188.5 billion.
Next are three Midwestern metros, Elgin, Illinois, Grand Rapids, Michigan and Milwaukee, Wisconsin.
Places like Newark and Camden are likely seeing home values jump in part because they are attracting demand from people who are priced out of New York and can now work remotely, Redfin said.
Midwestern metros like Milwaukee and Grand Rapids are experiencing home value gains for a similar reason.
They are affordable, and when mortgage rates and home prices are elevated, demand for affordable homes goes up.
‘America’s homeowners are sitting pretty. They’re holding a massive amount of housing wealth, despite lackluster demand from buyers, because home values skyrocketed during the pandemic and now a supply shortage is preventing those values from falling,’ said Redfin economics research lead Chen Zhao.
‘Prospective buyers aren’t as lucky. The combination of elevated mortgage rates, high home prices and a limited pool of homes for sale means homeownership is about as unaffordable as ever.’
But not every homeowner has seen their property increase in value.
‘Home values skyrocketed during the pandemic and now a supply shortage is preventing those values from falling,’ said Redfin economics research lead Chen Zhao
Four metros saw declines in overall home value, according to Redfin.
Pandemic ‘boomtown’ Boise, in Idaho, saw prices decline 3.8 percent to a total of $123.9 billion and New York saw prices fall 1 percent to $2.4 trillion.
New Orleans prices went down 0.8 percent to $124 billion and homes in Stockton, California, lost 0.7 percent in value – falling to a total of $109.2 billion in value.
The metros with the smallest increases were Philadelphia, at 0.3 percent, Honolulu, at 0.8 percent, Austin, Texas, at 1 percent, Denver at 1.3 percent and Riverside, California at 1.6 percent.
Most of these metros have something in common, said Redfin, which is that they have become unaffordable for many homebuyers. This means that there is a cap on demand, so home values no longer have much, if any, room to rise.
New York, Honolulu, Riverside and Denver all have median home sale prices of at least $550,000 – well above the national median.
And in Boise and Austin, which also have median sale prices above the national level, many people are priced out because an influx of out-of-towners caused home values to skyrocket during the pandemic.
But some experts predict that there will be a shift in the housing market in some parts of the US in 2024, driven by a surge in Baby Boomers downsizing into smaller properties.
Analyst Meredith Whitney, who is known as the ‘Oracle of Wall Street’ after she correctly predicted the 2008 financial crash, said house prices in some states will fall this year.
So-called pandemic ‘boomtown’ Boise, Idaho, saw prices decline 3.8 percent to a total of $123.9 billion in December 2023 – the most of any metro
Analyst Meredith Whitney, who is known as the ‘Oracle of Wall Street’, said house prices in some states will fall this year
This, in turn, will free up inventory and bring costs down for first-time buyers.
Whitney said homes in New York, New Jersey and Ohio will see a fall in prices. By comparison, homes in Texas, Tennessee and Utah will remain strong, she said.
She told DailyMail.com: ‘Around 90 percent of housing stock is owned by over 40s while 74 percent is by those over 50.
‘It makes logical sense that lots of these owners will start to downsize in the next decade. That’s almost 35 million homes – it’s a huge number to go through the system.
‘My advice to homeowners is: if you want to sell, you’re better off doing it sooner than later.’
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House prices in Louisiana fell at the steepest rate of any US state last year, new data shows.
Between January and December 2023, the average property in the Bayou State dropped by $4,370 to $195,356.
By comparison, homes in Connecticut saw the biggest spike in values, rising by $33,293, according to Zillow data.
The findings come after a tumultuous year for America’s property market which saw housing affordability hit a 39-year low thanks to soaring mortgage rates and still-high house prices.
But fresh analysis by the New Jersey Real Estate Network shows how the picture varies drastically across the country. Researchers looked at how much the average home in each state was listed for in January 2023 and compared it with December 2023.
The New Jersey Real Estate Network looked at how much the average home in each state was listed for in January 2023 and compared it with December 2023
After Louisiana, Idaho saw the second-biggest drop in property prices, with the average home falling from $437,392 at the start of the year to $434,224 by the end. It marked a decline of $3,268, or 0.75 percent.
It was followed by Texas, North Dakota and Nevada which saw home values drop by $1,241, $895 and $448 respectively.
By comparison, the top five states to see the biggest house price increases were: Connecticut, Maine, New Hampshire, New Jersey and Rhode Island.
Maine saw prices shoot up from $356,515 to $385,019 over the course of the year – an increase of $28,504 or 8 percent.
Homes in New Hampshire increased by 7.49 percent from $416,055 to $447,215.
A spokesman for the New Jersey Real Estate Network said: ‘The spike in housing prices across certain states results from a mix of factors.
‘Economic vitality, job growth and population influx can drive demand, while supply constraints and low interest rates amplify the increase in prices.’
It comes after an unprecedented three years for the US real estate landscape.
During the pandemic house prices ballooned from $329,000 in January 2020 to $433,000 two years later, according to US census data.
Many families were embroiled in a so-called ‘race for space’ as they looked for bigger homes and gardens to spend lockdown. A widespread shift to working-from-home also unchained workers from their city center properties.
During the pandemic house prices ballooned from $329,000 in January 2020 to $433,000 two years later, according to US census data
In January 2022, the average rate on a 30-year fixed mortgage was hovering at 3.45 percent, according to government-backed lender Freddie Mac. It is around half today’s rate of 6.66 percent
But house prices have remained elevated ever since, with the median house price still hovering at $420,000 according to Realtor.com.
This is despite the fact mortgage payments have soared in response to the Federal Reserve’s aggressive campaign to hike interest rates to their current 22-year high.
In January 2022, the average rate on a 30-year fixed mortgage was hovering at 3.45 percent, according to government-backed lender Freddie Mac. It is around half today’s rate of 6.66 percent.
In real terms, it means a buyer today faces paying an extra $800 per month on their mortgage than if they had bought two years ago.
At the current rate, somebody purchasing a $400,000 home with a 5 percent downpayment faces shelling out $2,442 per month on a 30-year fixed mortgage.
But had they bought in January 2022 – when rates were hovering at around 3.45 percent – they would have paid just $1,696.