Record-breaking $47 Trillion US Housing Market Surges Amid Inventory Shortage
The US housing market achieved a remarkable milestone in June, with a total valuation of $46.8 trillion, surpassing the previous record of $46.6 trillion set last year, according to Redfin. The surge in housing values is attributed to a shortage of homes, as estimated by Redfin for over 90 million residential properties in the US.
In June, the value of US homes increased by 0.4% compared to the previous year, representing a significant 19.1% rise in just two years. Impressively, the housing market has successfully offset the $2.9 trillion decrease in value resulting from rising mortgage rates between June 2022 and February 2023.
Redfin economist Chen Zhao stated that the prevalence of the 30-year fixed-rate mortgage has contributed to the maintenance of home values. Many homeowners initially secured exceptional deals during the pandemic, obtaining a 3% mortgage rate for the remaining duration of their 30-year loan. As a result, they are now opting to stay in their current homes due to the prospect of significantly higher rates associated with relocation. Consequently, prospective buyers are left competing for a limited inventory of homes, preventing a decline in home values.
The report indicates that nearly 90% of homeowners with mortgages presently enjoy rates below 6%, well below the nearly 7% levels observed since the end of 2022. This has resulted in a mere 1% of homes changing ownership this year, marking the lowest amount in at least a decade.
In contrast, the number of homes available for sale in the US reached an all-time low in June, experiencing a 15% decline compared to the previous year.
Additional findings from Redfin’s survey include the following:
- Los Angeles witnessed the largest decrease in aggregate home value, with a $152.6 billion annual decline in June.
- Homes valued between $500,000 and $750,000 experienced a 4.1% increase in value, whereas those valued between $2 million and $5 million incurred a 7.4% drop in value.
- Home values remained relatively stable in suburban and rural areas, while urban areas experienced more significant fluctuations.
Millennials currently possess a higher market share, in terms of valuation, than the silent generation (born between 1925 and 1945).
Redfin Economist Chen Zhao emphasized that the US housing market has become a system of winners and losers. Homeowners who purchased before the rise in mortgage rates continue to accumulate equity, despite a slowdown in homebuyer demand. Conversely, first-time buyers face challenges due to expensive borrowing costs, record-high home prices, and limited housing options.