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US Housing Market’s Meteoric Rise: A $47 Trillion Valuation

Hold onto your hard hats, property enthusiasts! The US housing market is booming like never before, touching an unprecedented valuation of $46.8 trillion this past June. And guess what’s fueling this surge? A dearth of available inventory.

Flashback to last year, and the record stood at $46.6 trillion. This year’s jump isn’t just random growth; it’s a direct result of the ongoing home shortage. A deep dive into Redfin’s study on over 90 million US residences revealed the math behind the magic.

While the value of American homes saw a modest 0.4% year-over-year increase in June, the cumulative rise over the last 24 months is a jaw-dropping 19.1%. Rewind to the period between June 2022 and February 2023, the market experienced a value dip of $2.9 trillion due to climbing mortgage rates. However, current trends show a resurgence, making up for that slip.

So, what’s the secret sauce to keeping home values robust? Redfin economist Chen Zhao points to America’s love affair with the 30-year fixed-rate mortgage. During the pandemic, many homeowners struck gold with 3% mortgage rates that last the full 30-year term. These rates have made moving a less enticing option as it would mean grappling with current rates, which are nearly double.

This mortgage rate advantage has another consequence: reduced property movement. A staggering 90% of mortgage holders are enjoying rates under 6% – a far cry from the near-7% figures since 2022’s close. This has culminated in a mere 1% of properties exchanging hands in 2023, a decade’s low, according to Redfin.

June wasn’t just notable for its record valuation but also for hitting an all-time low in the number of homes up for grabs, a 15% year-on-year nosedive.

Diving into more nuggets from Redfin’s report:

  • Los Angeles faced the most significant dip in aggregate home value: a whopping $152.6 billion annual drop in June.
  • Residences valued between $500,000 to $750,000 saw their worth increase by 4.1% annually. In contrast, those in the $2 million to $5 million bracket experienced a 7.4% drop.
  • Urban areas were outshined by suburban and rural counterparts when it came to holding home values.
  • Shifting generational trends are evident: Millennials are now holding a larger market share by valuation than the Silent Generation.

Zhao captures the essence of the current scenario aptly, remarking, “The U.S. housing market is essentially a game of musical chairs with winners and losers. Early-bird homeowners are basking in rising equity, while first-timers face high borrowing costs, sky-high home prices, and a meager selection.”

For investors and entrepreneurs, understanding these shifts and intricacies can be the key to making informed decisions in the real estate realm. The housing market story continues to unfold, and it’s a narrative worth watching.