Residential Real Estate News
U.S. Home Values Rising Fastest in Most Expensive West Coast Cities in Early 2024
San Jose, San Francisco, Los Angeles leading the country in Q1, boosted from A.I. jobs spike
Homebuyers this spring are encountering markedly different levels of competition depending on the market. Inventory levels play a crucial role, as indicated by the latest Zillow market report for March 2024.
"Today's shoppers should brace for competition, particularly for appealing properties at the lower end of the price spectrum, which are increasingly scarce," stated Skylar Olsen, Zillow's chief economist. "This demand is driving price increases in most regions, despite ongoing affordability issues. Some relief is seen in areas with new construction and where homeowners aren't as constrained by their mortgages, though this is less common in the nation's pricier metros. In these high-cost areas, homeowners often have substantial mortgage debt locked in at low rates, heightening the market pressure even more."
In the most expensive U.S. metros, prices are escalating more rapidly than elsewhere. The greatest monthly increases in home values are observed in coastal California cities and Seattle, with San Jose leading at 3.3%. San Francisco, Seattle, San Diego, and Los Angeles also report increases of 2% or more. These West Coast metros are enjoying a significant AI jobs renaissance and are among the 50 largest in the U.S. They notably also have the highest proportion of homeowners likely fixed into their mortgages, driven by the high costs of securing new mortgages at current rates.
Bidding wars are frequent in these areas, which are prominent for the percentage of homes selling above the asking price, based on the most recent data from February. Competition is fierce due to limited options; these cities have also experienced slower inventory recovery post-pandemic.
Conversely, price appreciation is more moderate in Southern metros like New Orleans, San Antonio, Tampa, Orlando, and Jacksonville, all showing just over 0.5% growth month-over-month. Here, new construction has helped alleviate some market pressure, offering upgrades for potential buyers. New listings of existing homes have increased from pre-pandemic levels in cities like New Orleans and Austin, whereas the mentioned Florida metros and San Antonio have observed minimal declines.
These Southern markets have seen inventory levels stabilize, reducing competition and moderating price increases. Notably, New Orleans, Austin, and San Antonio offer more choices now than pre-pandemic, with Tampa, Orlando, and Jacksonville experiencing only a 9% reduction, one of the smaller declines nationwide.
Despite recovery in some areas, a national divide persists between high-demand and slow-moving listings. In markets where inventory levels have normalized, buyers are finding better negotiation leverage.
Properties sold in March took an average of 13 days, a slight increase from 2021 and 2022, yet still faster than before the pandemic. Well-positioned and competitively priced homes are expected to sell even quicker in the coming months as competition intensifies. However, other listings remain longer on the market, with the median listing duration at 43 days on Zillow.
Even in relatively affordable Midwestern markets and high-cost coastal cities like Seattle and Washington, D.C., market times for sold listings are exceptionally short, nearly matching the peak pandemic frenzy. In 17 major metros, homes typically sold in a week or less.
Regarding price adjustments, over 20% of sellers reduced their asking prices in March, the highest proportion for this time of year in over a decade. Markets where price cuts are most frequent include Tampa, Phoenix, Jacksonville, San Antonio, and Orlando. Conversely, nearly 27% of homes sold for more than the asking price in February, an increase from less than 19% in 2019, indicating that sellers who effectively price and present their homes can successfully capitalize on market conditions.
