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The United States housing market has officially recovered nearly $3 trillion in value it lost due to rising mortgage rates as low inventory drives up prices, according to an analysis released Friday by Redfin.
The total worth of homes in the United States hit a record high of $46.8 trillion in June, overtaking the prior all-time high of $46.6 trillion set a year earlier, according to the analysis. The housing market has now fully recovered the $2.9 trillion in value it lost between June 2022 and February 2023 as a result of rising interest rates, according to the data.
“The dominance of the 30-year fixed rate mortgage in America is propping up home values,” Redfin Economics Research Lead Chen Zhao said. “Tons of homeowners scored an incredible deal during the pandemic: a 3 percent mortgage rate for the remainder of their 30-year loan. Now they’re staying put because moving would mean taking on a rate that’s twice as high.”
“This means buyers who are in the market now are duking it out for a very small pool of homes, preventing home values from plunging,” Zhao added.
Housing prices were able to recover value so quickly because so few of them are being listed. With approximately 9 out of 10 homeowners with a mortgage enjoying an interest rate of less than 6 percent, homeowners are only selling if they absolutely need to, while buyers are feeling the squeeze as high mortgage rates meet high home prices.
The biggest drops in home values were seen in West Coast tech hubs and pandemic boomtowns. Out of the 32 metropolitan areas where aggregate home value declined from a year earlier — bucking the national trend — 11 are in California and seven are in Texas.
The value of homes in Austin fell 9.6 percent year over year to $388.1 billion in June — the largest decline recorded. Oakland followed with a 8.7 percent decline and Seattle with an 8.1 percent decline in value.
Relatively affordable markets meanwhile posted the biggest gains in value, with Little Rock, Arkansas climbing 8.8 percent year over year to a total valuation of $63.7 billion. Little Rock was followed by Camden, New Jersey where prices climbed 8.7 percent, and Milwaukee where they grew by 8.5 percent.
