The U.S. housing market value plunged $2.7 trillion during the final two quarters of 2022, marking the largest June – December percentage drop since 2008, according to a new report from Redfin.
Driving the housing decline is a decrease in demand from homebuyers, largely driven by an increase in mortgage rates, which reduces buying power.
“The housing market has shed some of its value, but most homeowners will still reap big rewards from the pandemic housing boom,” said Redfin Economics Research Lead Chen Zhao. “The total value of U.S. homes remains roughly $13 trillion higher than it was in February 2020, the month before the coronavirus was declared a pandemic.”
Zhao added, “Unfortunately, a lot of people were left behind. Many Americans couldn’t afford to buy homes even when mortgage rates hit rock bottom in 2021, which means they missed out on a significant wealth building opportunity.”
According to Redfin’s housing data, the San Francisco Bay Area took the biggest hit, as year-over-year home values fell 6.7 percent, “a larger drop in percentage terms than any other major U.S. metropolitan area,” the company noted.
The only other cities that saw year-over-year declines were New York, Seattle, and Boise, Idaho.
By contrast, the housing market in Florida is booming, with the total value of Miami homes rising 19.7 percent year-over-year and North Port-Sarasota climbing 17.8 percent.
Even despite Hurricane Ian causing billions of dollars in damage in 2022, Florida had 60 percent of the metropolitan areas with the largest annual home-value increases.
“Florida’s housing market is being sustained by folks moving in from the North and as of recently, the West Coast,” said Elena Fleck, a Redfin real estate agent in Palm Beach, Florida. “People are pouring in from New Jersey and New York, in large part because Florida has relatively affordable homes and no income tax. They can get a lot more bang for their buck here.”
Redfin’s research also found that the value of U.S. suburbs increased at a rate roughly four percent higher than the value of urban homes.
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