US Homeowners lost $2.3 trillion since June

U.S. homeowners have lost $2.3 trillion since June, according to a new report from the real-estate brokerage Redfin. The total value of U.S. homes was $45.3 trillion at the end of 2022, down 4.9% from a record high of $47.7 trillion in June. That figure signifies the largest June-to-December percentage decline since 2008.

The report comes amid increased mortgage rates as the Fed tries to curb inflation. The 30-year fixed mortgage rate sat at 6.36% in December, about twice what it was at the start of 2022. Though rates fell in early February, they’ve since risen back to December levels to the dismay of buyers.

Consequently, Americans find themselves more reluctant to buy homes and prices have dropped. The median U.S. home sale price was $383,249 in January, which was up just 1.5% from the previous year, according to the report.

Redfin highlighted the Bay Area, noting that the region had seen the biggest drop in real-estate value compared to other parts of the country. For instance, the total value of San Francisco homes fell 6.7% in December, to $517.5 billion, a $37.3 billion decline year over year.

“Three of my listings recently went under contract after sitting on the market for more than a month,” said Ali Mafi, a Redfin real estate agent in San Francisco featured in the note. “They all had a few showings here and there in the fall, but no buyer wanted to pull the trigger. And then suddenly in the new year, we had 10 or 15 people touring each property.”

Meanwhile, the report pointed out, the Florida housing market has remained robust, with the largest increase in real-estate value compared to other parts of the country. The total value of homes in Miami rose 19.7% year over year ($77 billion) to $468.5 billion in December.

“Florida’s housing market is being sustained by folks moving in from the North and as of recently, the West Coast,” said Elena Fleck, Florida real estate agent featured in the report. “People are pouring in from New Jersey and New York, in large part because Florida has relatively affordable homes and no income tax. They can get a lot more bang for their buck here.”

The report noted that U.S. cities are doing much worse than U.S. suburbs. While the value of urban homes increased 2.5% to $10.8 trillion year over year, the value of suburban properties jumped 6.4% year over year, to $25.4 trillion, in December.

While some experts see “armageddon” in the real estate market more broadly, others believe the most challenging time for the market has passed, pointing to data that the market is showing signs of recovery. For instance, confidence among single-family home builders in January rose for the first time in over a year, according to the National Association of Home Builders/Wells Fargo. Also, pending home sales increased 2.5% in December, marking the end of a six-month decline. 

“The housing market has shed some of its value, but most homeowners will still reap big rewards from the pandemic housing boom. The total value of U.S. homes remains roughly $13 trillion higher than it was in February 2020, the month before the coronavirus was declared a pandemic,” said Redfin Economics Research Lead Chen Zhao in the report.

“Unfortunately, a lot of people were left behind. Many Americans couldn’t afford to buy homes even when mortgage rates hit rock bottom in 2021, which means they missed out on a significant wealth building opportunity,” Zhao added.