Total Value Of All US Residential Real Estate Hits Record $47 Trillion

The total value of homes in the US hit a record-breaking $47 trillion in June 2023. We explore what's driving America's house price growth and which markets are posting the largest gains.

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The U.S. housing market has recently reached a historic milestone, as the total value of all US real estate hit an all-time high of $47 trillion in June 2023. An analysis from the Redfin Estimate of over 90 million US residential properties has offered some interesting insights into this increased demand. But what’s driving the upturn in values?

We explore the factors contributing to these record figures.

Surging Prices Despite Sluggish Demand

Interestingly, the record-breaking numbers come amid a period marked by lukewarm demand. The reason? A significant shortage of homes on the market. With fewer homeowners deciding to sell, supply has struggled to meet demand. This has kept housing values propped up.

One factor behind homeowners’ reluctance to sell is the attractive 3% mortgage rate many locked in during the pandemic. For them, selling and moving would mean taking on a mortgage rate that’s nearly double the rate they currently enjoy. While this also affects demand from potential purchasers, the lack of inventory is balancing out the slowing of demand.

Winners and Losers in Today’s Market

According to Redfin Economics Research Lead, Chen Zhao, the current housing scenario in the US is a stark delineation of “winners and losers”. The winners are those who made their purchases before the rise in mortgage rates, continuously building equity. On the other hand, first-time buyers find themselves grappling with high borrowing costs, sky-high home prices, and a competitive market with few houses.

West Coast and Pandemic Boomtowns See Declines

West Coast tech hubs and previously popular pandemic destinations witnessed some of the most significant declines in home values. Locations like Austin, Seattle, San Francisco, and Los Angeles experienced drops ranging from 6.6% to 9.6% year over year. These declines can be attributed to a cocktail of factors, from pricey markets having more room for value drops to remote workers departing to more affordable locales, and tech industry layoffs.

Affordable Markets Shine

Conversely, more affordable markets like Little Rock and Milwaukee have seen remarkable gains in home value. Many of these markets haven’t experienced the overheating observed in cities like Phoenix or San Francisco. This has allowed room for values to climb. Homes in these markets typically sell for amounts below the national median of $426,056, making them attractive to potential buyers.

Millennials Hold More Home Value

The total value of all US real estate owned by Millennials grew by 2.9% year on year to the first quarter of 2023. They now outpace “the silent generation” (those born from the 1920s – 1940’s) in terms of home value. This is attributed to the fact that millennials are now of prime home-buying age, and make up around 60% of purchases bought with mortgages in recent years.

Luxury vs. Mid Range

The total value of all US real estate is on the rise, but not all properties are appreciating. While luxury homes are facing a dip in value, homes priced between $250,000 and $750,000 are seeing substantial gains. The total value of homes between $500,000 and $750,000 shows an increase of 4.1% year on year and 4% for those between $250,000 and $500,000. In contrast, homes valued between $2 million and $5 million witnessed a 7.4% decrease in value, while those in the $1 million to $2 million range faced a 2.6% reduction.

The dynamics of the current U.S. housing market—marked by a tug-of-war between demand, supply, and external economic factors—make for an interesting reading. Homeowners are holding onto their low mortgage rates and first-time buyers are facing multiple obstacles, making the trajectory of the market hard to predict. However, the U.S. housing market will likely start to reset once mortgage interest rates ease.

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