Map reveals states where housing market has plummeted by billions

The U.S. overall housing market value continued growing this year, reaching a record $55.1 trillion in June, according to Zillow.

The growth comes despite recent supply headwinds putting pressure on sellers to lower their asking prices.

Home values nationwide were up by a staggering 57 percent from early 2020, at the beginning of the pandemic home-buying frenzy, the equivalent of $20 trillion. About one dollar in eight—or 12.5 percent—of this increase was due to newly built homes, while the rest came from the vertiginous price appreciation of the existing stock over the past five years.

But while home values continue growing in many markets across the country, some of those that boomed during the pandemic—including Florida and Texas—have suffered the biggest declines so far this year.

Where—and Why—Have Home Values Exploded Over the Past Five Years?

Home values have skyrocketed across the country as a result of a surge in demand during the pandemic, when mortgage rates reached lows of 2-3 percent, which clashed with a chronic lack of inventory across the country.

According to Zillow, home values have grown nearly three times as fast as normal in the past five years. Historically, home values grow by an average of 4 percent each year, which means that they should now be roughly 20 percent higher than they were in 2020. Instead, home values are now up by nearly 60 percent.

Four states were the absolute winners of this rapid home value appreciation. Since the start of the pandemic, the biggest total value increases were recorded in California (+$3.4 trillion), Florida (+$1.6 trillion), New York (+$1.5 trillion), and Texas (+$1.2 trillion), according to Zillow.

Three of these four states, however, are now seeing the biggest year-over-year drop in home values, as former pandemic boomtowns such as Austin, Dallas, and Miami now quickly cool down.

And Where Are They Now Falling the Most?

Florida led the country as the state with the biggest year-over-year drop in home values in June, losing $109 billion. California followed with a loss of $106 billion in home values, trailed by Texas with a loss of $32 billion.

Homes are still appreciating in only one of the four states which saw the biggest overall increases over the past five years. New York’s housing market gained $216 billion in one year, the highest increase reported in the nation, accounting for one-quarter of total U.S. growth.

Despite the recent drops, California, Florida, and Texas—together with New York—remain among the states where home values are the highest. The total market value of the California housing market reaches $10,813 billion; New York’s housing market is valued at $4,296 billion; Florida’s housing market is worth $3,715 billion; Texas’ housing market is valued at $3,323 billion.

Why Are Home Values Falling In These States?

Sun Belt states like Florida and Texas exploded during the pandemic, when the rise of remote work spurred an influx of newcomers seeking more affordable housing, good weather, and lower taxes. This sudden surge in demand triggered a boom in new construction as developers tried to keep up with the growing number of homebuyers in the two states. This new construction, in turn, boosted home values in both Florida and Texas.

According to Zillow, new construction has accounted for 22 percent and 23 percent in home value growth in Texas and Florida respectively since early 2020. A lot of this new inventory, however, landed on the market when demand was dwindling in these states due to declining affordability and rising employers’ return-to-office orders across the country.

As sales have fallen in these states in recent months and inventory has grown, developers have been forced to slash prices and offer other types of incentives to attract reluctant buyers. Building new homes in these states is just not as profitable as it was three years ago.

Similar conditions are present in most of the country—apart from the Northeast and the Midwest—where the housing shortage is still acute. In the U.S. housing market, sellers now outnumber buyers by over 500,000, according to recent data by Redfin. While home prices are still rising, with the nation’s total housing wealth at $862 billion, they are doing so at a slower pace than between 2020 and 2022, growing by just 1.6 percent this year.