US housing market surges by almost 50% since February 2020: Zillow.
The US Housing Market Soars to New Heights in 2023
The housing market in the United States has experienced an incredible recovery this year. According to a recent estimate by Zillow, the overall value of the market has reached a staggering $51.9 trillion, surpassing the previous peak in June 2022 by $1.1 trillion. This represents a remarkable 49 percent increase in home values since the start of the pandemic in February 2020.
While a small portion of this growth can be attributed to a 1.3 percent increase in the average value of houses over the past year, the real driving force behind this surge is new home construction.
“A steady flow of new homes hit the market this spring and summer, helping chip away at the deep inventory deficit and boosting the total value of the market,” said Zillow’s senior economist Orphe Divounguy.
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The Zillow report also reveals that developers are adapting to the needs of today’s home buyers who are concerned about higher mortgage rates. They are now building smaller, more affordable homes or townhomes to cater to these demands. Additionally, there is a growing trend for higher-density homes to mitigate increased costs.
Karen Hatcher, CEO of Sovereign Realty & Management in Atlanta, highlights the need for more new construction to meet the rising demand for housing. She explains that while the Atlanta metro area hasn’t seen much new construction, the suburban areas have experienced significant growth due to the availability of land.
According to Hatcher, home costs have been overpriced in recent years, creating a seller’s market with multiple offers. The toughest markets to enter are those with higher-valued school systems.
California takes the lead in harboring the highest home values, accounting for almost 20 percent of the national total with over $10 trillion. Florida, New York, Texas, and New Jersey complete the top five.
Over the past five years, the four most valuable metro areas have remained unchanged: New York, Los Angeles, San Francisco, and Boston. Miami has emerged as a newcomer, claiming the fifth spot and displacing Washington.
In Florida, the four markets that have gained the most value since the start of the pandemic are Tampa (88.9 percent growth), Miami (86.6 percent), Jacksonville (82.4 percent), and Orlando (72.3 percent).
Teresa Kinney, CEO of the Miami Association of Realtors, attributes South Florida’s success to a significant wealth migration. Home buyers and companies from high-taxed, high-density states have relocated to South Florida, leading to a population increase and a robust luxury market. Miami has now experienced 141 consecutive months of price appreciation.
According to a recent report from Realtor.com, despite high mortgage rates, home values continue to rise. California still boasts some of the highest-priced homes in the country, with the San Jose-Sunnyvale-Santa Clara area topping the list with a median sales price of $1.474 million.
Scott Segall, an agent in Beverly Hills, California, notes that there is no downturn in the nation’s top-priced homes. He emphasizes the disconnect between interest rates and home prices, stating that $1 million will only buy a small house on a mediocre street.
Despite the surge in new construction, inventory remains persistently low, putting upward pressure on home prices, according to Realtor.com.
How has the increased preference for spacious and affordable homes outside the city center impacted the US housing market in recent years?
The increased preference for spacious and affordable homes outside the city center. Hatcher predicts that this trend will continue in the coming years, with buyers prioritizing larger homes and outdoor spaces.
In addition to new home construction, the US housing market is also benefitting from low interest rates and a strong economy. The Federal Reserve’s efforts to keep borrowing costs low have encouraged many Americans to enter the housing market. With mortgage rates below 3%, potential buyers are taking advantage of this opportune time to invest in real estate.
Another factor contributing to the soaring housing market is the Biden administration’s commitment to infrastructure development. The proposed infrastructure bill aims to invest trillions of dollars in improving transportation, broadband access, and affordable housing. This initiative has instilled confidence in both homebuyers and developers, further fueling the market’s growth.
Despite the overall positive outlook, some challenges remain. One major concern is the shortage of skilled labor in the construction industry. Builders are struggling to find enough workers to meet the growing demand, leading to delays and increased costs. This issue may hinder the pace of new construction projects in the future.
Additionally, the rising cost of building materials, such as lumber and steel, has also impacted the affordability of new homes. Supply chain disruptions and increased demand have driven up prices, making it difficult for some buyers to afford their dream homes. However, experts believe that these supply chain issues will eventually stabilize, helping to alleviate some of the cost pressures.
In conclusion, the US housing market has experienced a remarkable recovery in 2023. New home construction, adaptability to buyer preferences, low interest rates, and government initiatives are driving this growth. However, challenges such as labor shortages and increased material costs persist. As we move forward, it is crucial for the industry to address these issues to ensure a sustainable and inclusive housing market for all Americans.
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