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Despite slowing sales, the value of the U.S. housing market experienced record-breaking growth in 2023, according to Redfin’s latest housing report. The total value of 90 million U.S. homes rose from $45.1 trillion in December 2022 to $47.5 trillion in December 2023 — a 5.3 percent annual difference.
The average U.S. home’s value jumped 4.30 percent year over year to $495,183 in December. That’s below the second and third quarters of 2022 and 2023 when the average home value surpassed $500,000, meaning homes purchased during either of those quarters have depreciated.
Chen Zhao | Credit: Redfin
“America’s homeowners are sitting pretty,” Redfin Economics Research Lead Chen Zhao said in a written statement. “They’re holding a massive amount of housing wealth, despite lackluster demand from buyers, because home values skyrocketed during the pandemic and now a supply shortage is preventing those values from falling.”
On a regional basis, the Northeast and Midwest saw the biggest total home value gains.
Newark’s total home value rose 12.8 percent year over year to $359.6 billion, the largest gain of any U.S. metro. New Haven, Connecticut (+11.9 percent), Camden, New Jersey (+10.8 percent), Charleston, South Carolina (+10.8 percent), and Elgin, Illinois (+10.4 percent) rounded out the top five markets with the largest gains in total home value.
Redfin said these markets’ gains come from their affordability, especially compared to other cities within their regions. Newark and Camden benefit from buyer interest coming from New York City, and Milwaukee and Grand Rapids benefit from buyers across the Midwest looking for an affordable place to settle.
“When mortgage rates and home prices are elevated, demand for affordable homes goes up,” the report read.
Meanwhile, historically expensive markets and pandemic boomtowns haven’t fared as well, either losing value or logging minuscule gains in 2023.
Boise experienced the largest drop in total home value (-3.8 percent), followed by New York (-1 percent), New Orleans (-0.8 percent) and Stockton, California (-0.7 percent). Philadelphia (+0.3 percent), Honolulu (+0.8 percent), Austin (+1 percent), Denver (+1.3 percent) and Riverside, California (+1.6 percent) barely eeked out gains of two percent.
“Most of the metros above have something in common: They’ve become unaffordable for many homebuyers, so home values no longer have much room, if any, to rise, because there’s a cap on demand,” the report read. “And in Boise and Austin, which also have median sale prices above the national level, many people are priced out because an influx of out-of-towners caused home values to skyrocket during the pandemic.”
Although the record-breaking boost in the value of the U.S. housing market is great news for homeowners, Zhao said it offers a colossal challenge for homebuyers grappling with economic headwinds.
“Prospective buyers aren’t as lucky,” she said. “The combination of elevated mortgage rates, high home prices and a limited pool of homes for sale means homeownership is about as unaffordable as ever. One bright spot for buyers is that mortgage rates should start declining before the end of 2024.”
