10
Loading video...
By Giulia Carbonaro
Senior Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Chicago and New York City reported the biggest year-over-year home price increases in the United States in May, according to the latest data available under the S&P Cotality Case-Shiller Index, while markets in the West and South saw significant declines.
It is the latest evidence of the widening regional divide that has come to characterize the U.S. housing market in the aftermath of the COVID-19 pandemic homebuying frenzy, which caused home prices to skyrocket.
High-demand and supply-constrained metropolitan areas in the Northeast and the Midwest like Chicago, New York City and Cleveland almost single-handedly drove up national home value growth in May, according to the index, with the value of single-family homes, as measured by repeat transactions, rising 1.1 percent compared to a year earlier.
Read More on News
In real terms, however, national home values continued to decline in May as inflation climbed to 4.2 percent, its highest level in more than three years, and outpaced national home price gains for 12 straight months.
...
Hottest and Coldest Markets in the Country
Of the 20 U.S. cities tracked by the index, Chicago reported the biggest annual home price increase in the nation for the third straight month, at 6.9 percent. Over the three months through the end of May, the typical home in Chicago sold for a median price of $420,000, according to Redfin.
New York City and Cleveland followed with year-over-year increases of 4.2 percent and 3.1 percent, respectively. There, the median sale price of a home was $876,000 and $142,000, respectively, over the last three months, according to Redfin.
On the opposite hand there is Las Vegas, where home prices fell 1.9 percent in May compared to a year earlier. According to Redfin, the median sale price of a typical home in the city was $450,000 over the last three months.
Between the strongest market in the nation, Chicago, and the weakest, Las Vegas, there is a nearly 9 percentage-point gap, underscoring the deep regional divide now existing in the U.S. housing market.
“This divergence may reflect shifting post-pandemic housing dynamics, including a growing return-to-office mandate that appears to be supporting traditional urban markets,” Rebecca Kaufman, associate director of commodities at S&P Dow Jones Indices, said in a statement.
Other cities in the West reported similarly significant decline, with Seattle’s home prices falling by 1.8 percent in May compared to a year earlier and by 1.8 percent in Denver.
Tampa, one of the Florida markets that boomed during the pandemic, reported a decline of 1.6 percent, as it continues facing a stark price correction after demand shrank and new inventory flooded the market at the end of the health emergency.
“The geographic dispersion of home price trends continues to persist,” Kaufman said. “While major metropolitan areas in the Northeast and Midwest recorded year-over-year gains exceeding the national average, many metropolitan areas in the West and Sun Belt regions remain under pressure.”
Related Story
America’s New Home Sales Plummet to Weakest Rate in Years
What Is Behind This Regional Divide—and What Could Fix It?
Prices are still growing in cities in the Northeast and Midwest while they are falling in the West and South because demand has remained high in these markets despite affordability issues, but inventory is limited.
"The coastal West and the Northeast both see high home prices and scarce inventory, driven in large part by decades of underbuilding relative to job and population growth,” Hannah Jones, senior economist at Realtor.com, told Newsweek.
“These regions are anchored by dense, high-wage economic hubs—tech in the Bay Area, finance in New York and Boston, government and tech in D.C.—that draw a steady stream of high earners. That demand bids up prices across the board, including for renters and lower-income buyers competing for the same limited stock.”
Markets in the Sun Belt that were popular during the pandemic have seen a stark drop in demand since then, as employers in the Northeast and West issued return-to-office orders to workers who had left for more affordable southern cities.
...
The same markets have also seen a flood of new inventory as developers tried to make the most of the rise in demand during the pandemic, and the supply glut is now forcing sellers and builders to lower their asking prices. The only way the divide could be closed is if developers are allowed to build more homes where demand is higher.
According to the Urban Institute, the U.S. is short millions of affordable homes because construction has failed to keep pace with population growth. Researchers argue that upzoning—allowing more housing units per parcel—is a way markets suffering the most acute shortages could expand supply.
“Zoning is a big part of why supply hasn’t kept pace,” Jones said. “Much of the Northeast and coastal West is built out with single-family zoning, height limits, and lengthy permitting and environmental review processes that make it slow and expensive to add density. Land-use restrictions in these areas are often decades old and were designed around a much smaller population, so even when demand rises sharply, the housing stock can't expand quickly to absorb it.”
Contact Newsweek editors on this story: Matthew Robinson and Dave Siminoff.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines