Over the past year, the U.S. housing market has increased $2.4 trillion, elevating its value to $47.5 trillion, according to a Redfin analysis of more than 90 million U.S. residential properties through December.
That's a 5.3% increase in value from a year ago - the biggest increase in 11 months - and up 13.3% or $5.6 trillion from 2021.
But with high mortgage rates and rising home values, many homeowners are reluctant to put their houses on the market, resulting in a shortage of homes for sale.
Home values hit a low at the end of 2022, which is why the year-over-year growth at the end of 2023 was so great. And because of the nation's housing shortage, homes continue to be built, which also contributed to the rise in home value last year.
"America's homeowners are sitting pretty. They're holding a massive amount of housing wealth, despite lackluster demand from buyers, because home values skyrocketed during the pandemic and now a supply shortage is preventing those values from falling," Redfin Economics Research Lead Chen Zhao said. "Prospective buyers aren't as lucky. The combination of elevated mortgage rates, high home prices and a limited pool of homes for sale means homeownership is about as unaffordable as ever. One bright spot for buyers is that mortgage rates should start declining before the end of 2024."
Home values in metropolitan areas that boomed during the pandemic aren't holding up as well as those in the suburbs and rural areas.
Home values in four metro areas dropped. Boise, Idaho, was down 3.8%; New York dropped 1%; New Orleans dipped 0.8%; and Stockton, California, declined by 0.7%.
The metros with the smallest increases were Philadelphia, up 0.3%; Honolulu, 0.8%; Austin, Texas, 1%; Denver 1.3%; and Riverside, California, 1.6%.
The total value of homes in urban areas rose 3.6% to $10.1 trillion in December compared to suburban home values that increased 5.6% to $29.2 trillion and rural home values that were up 6.3% to $7.4 trillion.
"The suburbs came back into vogue during the pandemic while cities fell out of favor - largely due to the shift to remote work and the housing affordability crisis," according to the report. "While cities have bounced back to some extent as employers have asked workers to return to the office, many Americans still work remotely, incentivizing homebuying and building in far-flung affordable areas."