Home values rising fastest in costliest metros
- Home values are increasing rapidly in expensive metros like San Jose, San Francisco, Seattle, San Diego, and Los Angeles, with monthly home value growth topping 3.3% in San Jose.
- Buyers in costly areas are likely locked into their mortgages due to high rates, leading to bidding wars and inventory, with these metros seeing below-average recovery in inventory compared to pre-pandemic levels.
- New construction is providing relief in Southern metros like New Orleans, San Antonio, Tampa, Orlando, and Jacksonville, where appreciation is subdued but still fairly strong.
- Homes are selling faster, with properties in hot markets flying off the shelves in just 13 days in March, although the median age of all listings on Zillow is 43 days.
- More than 1 in 5 sellers cut their list price in March, the largest share in over a decade, while nearly 27% of homes sold over list price in February.
- Affordable markets in the Midwest and expensive coastal metros like Seattle and Washington, D.C., have extremely short times on market for listings that sell.
- None.
Insights
The movement of home values is a leading indicator of the health of the housing market and, by extension, is reflective of consumer confidence and spending capability. When analyzing the rapid appreciation in home values in costly markets, it's essential to consider the underlying supply and demand dynamics. Limited inventory in conjunction with locked-in low mortgage rates has created an environment where competition for homes is fierce, particularly in tech-centric West Coast metros.
This scenario delineates a market where supply-side constraints—such as new construction not keeping pace with demand—exacerbate price inflation. However, this inflation is not uniform across the country, with some Southern and Midwestern markets showing more subdued growth. This divergence can be indicative of broader economic trends and regional disparities in growth, which can influence real estate investment strategies and the performance of housing-related stocks.
From a financial perspective, an acceleration in home values impacts numerous stakeholders. For homeowners, increased equity can translate into greater financial stability or spending power. However, this rise in home values may also reflect a challenging environment for first-time buyers, potentially dampening future demand as affordability becomes strained. Mortgage lenders and real estate companies operating in these hot markets could see elevated activity, potentially resulting in higher revenues and profitability that benefit shareholders in the short run.
In the longer term, however, the sustainability of such growth must be questioned—if rate hikes continue in an attempt to cool inflation, mortgage affordability could decline, leading to a market correction. The knock-on effects could include a decrease in consumer spending, which would ripple through the wider economy and potentially affect the stock market. It remains important for investors to monitor these trends for signs of overheating in the housing market or a potential pivot point.
Home value trends are often interleaved with broader economic conditions. The data presented suggests a stark contrast between regions, reflective of the uneven economic recovery post-pandemic. Coastal cities, especially those with a technological and financial industry presence, continue to see their housing markets boom, which might be indicative of wealth concentration and job growth in these areas. Conversely, the slower growth in other regions could either point to a healthier balance between supply and demand or a lag in economic recovery.
The rate at which homes are selling over asking price or experiencing price cuts provides a granular perspective on market temperature. It's a symptom of the underlying economic drivers such as employment rates, wage growth and the overall business cycle. Hence, while housing market data is valuable in isolation, it gains additional significance when cross-referenced with employment statistics, consumer spending levels and regional economic policies, for a more comprehensive economic outlook.
Inventory and rate lock are deciding factors in market competition this spring
- Competition is stiff for attractive listings; homes that sold in March did so in just 13 days.
- Seasonal home value growth is fastest in the most expensive major metros — all West Coast tech hubs.
- More than 1 in 5 sellers cut prices in March, the highest share in more than a decade.
"Shoppers in the market today should expect competition, especially for attractive listings on the lower end of the price range — a rare opportunity these days," said Skylar Olsen, Zillow's chief economist. "That's kept prices ticking upward in most areas, despite affordability challenges. There are places where new construction relieved some pressure, and where homeowners are less locked into their mortgage, but not in the nation's most expensive metros. In costly areas, homeowners hold extensive mortgage debt at previously low rates, and the pressure is dialed up even further."
Buyers in the most expensive major
These five metros are the most expensive markets among the 50 largest in the
Bidding wars are common in these markets, all of which ranked among the top 10 for share of homes sold over asking price in February, the most recent data available. Buyers are competing over few choices; all of these metros have seen below-average recovery in inventory compared to before the pandemic.
Meanwhile, appreciation is subdued in Southern metros, where existing inventory has grown or nearly recovered since the outset of the pandemic. Metros with the slowest — but still fairly strong — growth are
New construction is providing a pressure-relief valve in these metros, giving buyers who want to move up a place to go. New listings of existing homes have risen from pre-pandemic levels in
Recovering inventory in these areas has helped ease competition and bring price appreciation under control.
Nationwide, the divide between hot and cold listings persists. In many markets where new and total inventory has recovered, buyers are gaining traction in negotiations.
Homes that sold in March did so in just 13 days. That's slightly slower than at this time in 2021 or 2022, but far faster than the pre-pandemic norm. Buyers can expect well-marketed and competitively priced properties to fly off the shelves even faster in April and May, as competition ramps up. But other listings are loitering; the median age of all listings on Zillow is 43 days.
Relatively affordable markets in the Midwest as well as expensive coastal metros like
A similar story emerges when looking at listings with price cuts versus those sold over list price. More than 1 in 5 sellers cut their list price in March, the largest share for this time of year in more than a decade. Places where cuts are the most common are
On the other hand, nearly
Metropolitan | March | ZHVI | Median | Share of | Share | Inventory | New |
1.1 % | 13 | 26.6 % | 20.6 % | -36.4 % | 3.7 % | ||
1.2 % | 21 | 42.4 % | 11.1 % | -53.2 % | -10.6 % | ||
2.0 % | 13 | 49.0 % | 14.6 % | -41.9 % | 2.4 % | ||
1.5 % | 7 | 34.1 % | 16.6 % | -54.0 % | -3.9 % | ||
1.1 % | 15 | 21.7 % | 25.4 % | -13.7 % | 16.6 % | ||
0.9 % | 20 | 14.3 % | 24.7 % | -17.3 % | 0.6 % | ||
1.6 % | 5 | 45.5 % | 15.0 % | -53.6 % | -13.6 % | ||
1.3 % | 8 | 36.6 % | 17.7 % | -54.5 % | -7.7 % | ||
1.0 % | 35 | 10.8 % | 24.0 % | -23.0 % | 8.7 % | ||
1.1 % | 17 | 23.4 % | 23.6 % | -22.2 % | 11.0 % | ||
1.8 % | 7 | 49.3 % | 12.1 % | -41.2 % | -17.2 % | ||
0.9 % | 21 | 16.7 % | 33.0 % | -33.3 % | 14.5 % | ||
2.7 % | 12 | 62.7 % | 13.2 % | -16.0 % | 11.4 % | ||
1.2 % | 17 | 38.3 % | 19.7 % | -41.8 % | 12.9 % | ||
1.6 % | 7 | 34.3 % | 16.2 % | -33.7 % | 3.7 % | ||
2.4 % | 6 | 43.5 % | 14.4 % | -33.0 % | 0.1 % | ||
1.4 % | 14 | 34.2 % | 16.9 % | -33.6 % | 5.4 % | ||
2.1 % | 10 | 48.2 % | 17.3 % | -46.5 % | 11.8 % | ||
0.7 % | 25 | 13.8 % | 33.7 % | -8.6 % | 15.4 % | ||
1.5 % | 7 | 32.0 % | 24.1 % | -17.2 % | -3.5 % | ||
1.4 % | 6 | 39.7 % | 19.9 % | -55.3 % | -5.1 % | ||
1.3 % | 5 | 36.2 % | 16.2 % | -54.0 % | -3.5 % | ||
0.7 % | 20 | 13.8 % | 26.9 % | -8.9 % | 9.0 % | ||
1.3 % | 9 | 32.9 % | 20.3 % | -18.1 % | 4.6 % | ||
0.6 % | 34 | 13.7 % | 27.8 % | 10.2 % | 2.4 % | ||
1.3 % | 8 | 30.8 % | 19.1 % | -31.5 % | 0.0 % | ||
1.5 % | 9 | 42.5 % | 17.8 % | -40.8 % | 14.4 % | ||
1.3 % | 8 | 21.3 % | 19.7 % | -49.9 % | -14.2 % | ||
1.6 % | 4 | 31.7 % | 19.3 % | -46.3 % | -4.4 % | ||
1.1 % | 30 | 14.8 % | 20.9 % | 28.5 % | 8.1 % | ||
1.1 % | 14 | 19.4 % | 19.8 % | -43.9 % | 14.6 % | ||
1.4 % | 4 | 33.3 % | 20.2 % | -48.1 % | 6.9 % | ||
1.6 % | 4 | 36.3 % | 19.6 % | -34.5 % | 5.3 % | ||
1.2 % | 6 | 19.8 % | 22.5 % | -29.6 % | 0.4 % | ||
1.6 % | 6 | 31.4 % | 15.6 % | -59.4 % | -9.9 % | ||
3.3 % | 9 | 69.4 % | 9.6 % | -26.4 % | 18.4 % | ||
1.1 % | 13 | 15.8 % | 26.7 % | -19.4 % | 4.1 % | ||
1.4 % | 20 | 34.3 % | 16.9 % | -55.4 % | -5.4 % | ||
1.6 % | 8 | 47.0 % | 12.1 % | -64.7 % | -8.1 % | ||
0.7 % | 32 | 11.5 % | 27.8 % | -9.1 % | 11.3 % | ||
1.9 % | 9 | 42.6 % | 10.9 % | -36.9 % | 7.3 % | ||
0.9 % | 14 | 25.0 % | 23.0 % | -20.3 % | 8.5 % | ||
1.2 % | 7 | 30.1 % | 22.2 % | -32.7 % | 4.4 % | ||
1.0 % | 22 | 16.4 % | 21.9 % | -6.5 % | 5.7 % | ||
1.6 % | 6 | 38.9 % | 15.6 % | -51.1 % | -5.6 % | ||
1.3 % | 7 | 20.4 % | 21.1 % | -37.8 % | 2.2 % | ||
0.5 % | 29 | 11.4 % | 23.7 % | 27.3 % | -8.5 % | ||
1.3 % | 10 | 31.0 % | 24.2 % | -20.3 % | 5.5 % | ||
1.6 % | 6 | 61.7 % | 11.7 % | -71.0 % | -8.4 % | ||
1.2 % | 10 | 48.7 % | 11.3 % | -50.2 % | -10.0 % | ||
0.9 % | 13 | 23.4 % | 19.5 % | -31.8 % | -1.2 % |
*Table ordered by market size |
About Zillow Group:
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FAQ
What are the major metros where home values are rising fastest?
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What percentage of homes sold over list price in February?
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