The Value of Residential Real Estate Broke a New Record $52 Trillion
- The total value of the U.S. housing market is 49% higher than before the pandemic.
- New York, Los Angeles, San Francisco, Boston and Miami are the most valuable housing markets.
- Florida now boasts the second-most-valuable real estate market, surpassing New York. California retains the top spot.
The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023. Higher mortgage rates then contributed to a decline in the total value of residential real estate as potential buyers reconsidered their plans and residential investment fell. That downturn has proven to be short lived as housing has rebounded impressively so far in 2023, with the total value of the U.S. housing market surging by more than $2.6 trillion over the past year.
While a small chunk of this growth can be attributed to a 1.3% rise in the average value of a US home over the past year, the powerhouse behind this surge has been new construction. Builders have chipped away at the housing deficit as a steady flow of new homes have hit the market this spring and summer.
With many homeowners opting to stay put and hold onto their low mortgage rate, new home sales should make up a bigger piece of the home sales pie moving forward. That’s especially true with builders adapting to the needs of today’s home buyers who are navigating higher mortgage rates — namely with smaller, more-affordable homes and by offering incentives like interest rate buydowns to tempt buyers off of the fence.
Builders have leaned into higher-density homes wherever possible to work around increased costs and bring desperately needed units to the market. Unfortunately, obstacles remain to new construction in many parts of the country. Measures that allow for more density and increase buildable land would help.
The four most valuable metro areas have remained largely unchanged over the past five years: New York, Los Angeles, San Francisco and Boston. A new entrant, Miami, has claimed the fifth spot, jumping all the way from ninth as recently as May 2021 to edge Washington, D.C., out of the top five.
Of the six markets where housing has gained the most value since the start of the pandemic, four are in Florida: Tampa (+88.9%), Miami (+86.6%), Jacksonville (+82.4%) and Orlando (+72.3%). It’s not surprising, then, that Florida has surpassed New York as the state with the second most valuable housing market. Large population growth is one reason for strong new construction figures in Florida, and the increased competition for existing homes has also helped raise home values.
California remains a behemoth with more than $10 trillion of value in its housing market; nearly 20% of the national total. Florida, New York, Texas and New Jersey round out the top five. Massachusetts, which had the fifth most valuable housing market on the eve of the pandemic, slots in at sixth now. Washington has fallen from fifth a year ago to seventh today.