The U.S. housing market suffered the largest decline in home values since 2008 as buyer demand slowed partly in reaction to rising mortgage rates.
A new report from real estate brokerage site Redfin shows the total value of U.S. homes fell from a record high of $47.7 trillion in June 2022 to $45.3 trillion at the end of the year — a 4.9 percent decrease in home values.
California’s Bay Area saw the largest percentage decline in total home values, with a decline of 6.7 percent over the past year for San Francisco, a 4.5 percent decline for Oakland and a 3.2 percent decline for San Jose. Just three other metros across the country — New York, Seattle and Boise, Idaho — experienced year-over-year declines.
Overall, nationwide home values still experienced a 6.5 percent annual increase.
But experts note that while some homebuyers could still benefit from the hot pandemic-era market’s low mortgage rates others remain on the sidelines.
“The housing market has shed some of its value, but most homeowners will still reap big rewards from the pandemic housing boom,” Redfin economics research lead Chen Zhao said in a statement. “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.”
“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.”
Mortgage rates are ticking up again after falling below 6 percent earlier this month — the first time since September — amid the Federal Reserve’s ongoing battle with inflation.
Data released by finance company Freddie Mac on Thursday showed the average 30-year fixed mortgage rate at 6.5 percent.
“The economy continues to show strength, and interest rates are repricing to account for the stronger than expected growth, tight labor market and the threat of sticky inflation,” Freddie Mac chief economist Sam Khater said in a media statement.
“Our research shows that rate dispersion increases as mortgage rates trend up. This means homebuyers can potentially save $600 to $1,200 annually by taking the time to shop among lenders to find a better rate.”