The national housing market has expanded significantly, now valued at $47.5 trillion after a $2.4 trillion increase in the last year, as per a preliminary Redfin analysis of over 90 million homes as of December last year. This growth is largely attributed to the trend of remote work, with specific types of cities driving the surge.
According to data journalist Lily Katz and Chen Zhao, head of the economics team, the total value of U.S. homes rose by 5.3% from the previous year in December, marking the largest increase in 11 months. The biggest jumps were seen in more affordable metropolitan areas, while expensive metros and pandemic boomtowns either saw minimal gains or declines. Cities like Newark, New Jersey, New Haven, Connecticut, Camden, New Jersey, Charleston, South Carolina, and Elgin, Illinois experienced significant increases in home values.
The authors note that cities like Newark and Camden are attracting demand from individuals priced out of larger cities like New York, who can now work remotely. These cities, along with similar metropolitan areas, are experiencing growth due to their affordability amidst elevated mortgage rates and home prices.
The report also highlights the rise of “secondary cities” with populations ranging from 150,000 and up, which are emerging as new growth centers due to the shift to hybrid work schedules favoring two to three days in the office. Cities like Newark and Camden are thriving under this new regime, serving as subcities to larger metropolitan areas.
The losers
Cities like Boise, Idaho, New York City, New Orleans, and Stockton, California saw declines in home values, while others like Philadelphia and Denver experienced minimal increases. The total value of homes in urban areas increased by 3.6% year-over-year to approximately $10 trillion, while suburbs saw a 5.6% increase to around $29 trillion. Rural areas also saw a 6.3% jump to $7.4 trillion.
Despite the freeze in the housing market last year and a decrease in existing home sales, home prices continue to rise. The authors attribute this to a lack of for-sale inventory, low mortgage rates holding homeowners back from selling, and an overall increase in housing construction in some areas.
Homeowners are ‘sitting pretty’
According to Chen Zhao, homeowners in America are benefitting from the surge in home values, despite limited demand from buyers and a shortage of homes for sale. Prospective buyers face challenges due to high mortgage rates, elevated home prices, and limited inventory. However, there is hope for buyers as mortgage rates are expected to decline by the end of 2024.
While forecasters predicted a decline in mortgage rates, they have only slightly decreased from their peak but remain relatively high. The average home value has increased from $474,740 in December 2022 to $495,183 in December last year, indicating a continued upward trend in the housing market.
