Despite higher mortgage costs deterring potential buyers, a Realtor.com report reveals that home prices are still on the rise in the majority of major U.S. cities.
Home prices in Greater Los Angeles saw a substantial 23.8% increase over the 12 months leading up to September 2023, as per data from Realtor.com released on Thursday.
During that period, the median home prices in the 50 largest metropolitan areas saw a median increase of 5.76%, and only a few cities experienced declines. San Antonio witnessed the most significant decrease, with home prices dropping by 2.8%.
Since September 2022, the following metropolitan areas have seen median home prices rise by 10% or more year-over-year:
|Providence, Rhode Island and Massachusetts||14.6%|
|Rochester, New York||11.4%|
According to Realtor.com data, prices in most of these cities stabilized or dropped in late 2022, but they have since rebounded in 2023.
Danielle Hale, the chief economist at Realtor.com, attributes the nationwide increase in home prices to the insufficient construction of homes to meet demand. This housing shortage is particularly acute in California, which may have the most severe shortage in the country. Given this, it’s not surprising that we’ve seen substantial price growth in cities like Los Angeles and San Diego, especially considering their recent price gains. According to Realtor.com’s active listings data1, median home prices in Los Angeles and San Diego have surged by 38% and 48% since January 2020, respectively.
Regarding smaller markets that have experienced significant price increases, such as Richmond, Cincinnati, Columbus, and Rochester, the key factor is their relative affordability, which keeps demand consistently high. Homes in these cities are typically listed for less than the U.S. median home price of $416,100, according to U.S. 2Census data.
Despite a significant increase in 30-year fixed mortgage rates from 3.2% to approximately 7.5% since January 2022, U.S. homebuyers continue to purchase homes at rising prices. One possible explanation is that buyers who were waiting for lower mortgage rates may have reentered the market, accepting the reality of “higher for longer” rates. Instead of waiting for rates to drop below 7%, they now perceive today’s rates as relatively favorable compared to potential future increases.
This shift in mindset has led to increased shopping activity, as evidenced by a doubling in transaction volume for some real estate professionals, such as Erin Sykes, Chief Economist and Real Estate Agent at Nest Seekers International.