BAM Key Details:
- A new report from Redfin reveals how much home price growth depends on location, emphasizing the need for agents to focus on local housing market trends.
- Home price growth variations hit a 30-year high in spring 2022; while they’ve come down, price growth still fluctuates more than it did before the pandemic.
- Price growth variations tend to increase in times of boom and bust.
Location matters—and not just for your clients. A new Redfin report highlights the extent to which home price growth varies from one local market to another. Home price growth depends more on location now than it has since 2009.
From the COVID pandemic to the Great Recession, variations have significantly increased in times of boom and bust. In spring 2022—as the curtain drew on the pandemic home buying boom—metro-to-metro home price growth variations hit a 13-year high.
And while they’ve come down since then, those variations are still more pronounced than before the pandemic, thanks to cooling markets in some metros and relatively stable or even thriving markets in others.
In the Bay Area, for example, home prices are dropping by double digits, while, in South Florida, they’re climbing by double digits—creating a gap that’s close to a 30-year high.
Home price growth depends on location
The historic gap between home prices in San Francisco and Miami shows just how important it is for agents to focus on local housing market data—and not to assume national trends will match those of their area.
San Francisco home prices fell 10.1% year over year while Miami home prices rose 10.9% to a near-record high. The 21 percentage point gap between them is nearly the widest in over three decades (it reached a peak of 23 ppts in August 2022). It’s also the largest gap among all the major metros in Redfin’s analysis.
As home prices in San Francisco decline, some previously sidelined Bay Area home shoppers may finally see an opportunity to buy a home, as long as they can afford today’s mortgage rates and still-exorbitant home prices.
San Francisco home prices are in decline largely due to the exodus of remote working tech employees from the Bay Area; migration from this area more than doubled from 2020 to 2022.
Layoffs in the tech industry, along with declining tech stocks—not to mention high mortgage rates and home prices that are still the highest in the country—have driven throngs of former California residents to other parts of the country.
One part of the country seeing an influx of people is Miami, where rising home prices are making it more difficult for South Florida residents to afford a home.
Miami prices keep rising as Florida continues to attract remote workers looking for relatively affordable homes in sunny locales.
The stark difference in home-price dynamics between the Bay Area and Miami may be a reflection of a long-term, pandemic-fueled shift in where people choose to live. The fact that Miami prices are holding up well despite the national pullback in home buying suggests the relative popularity of Florida is here to stay. Even though some employees are returning to offices at least a few days a week, the pandemic has given many Americans much more freedom on where they choose to live—and a lot of them are choosing places where shelling out $1.5 million for a run-of-the-mill home isn’t the norm.
Bay Area home prices are still much higher than those of South Florida, but as prices fall in San Francisco and rise in Miami, the gap is shrinking—and with it the amount home buyers can save by moving across the country.
In February, the median home-sale price in San Francisco was still 2.9 times higher than in Miami—about $1.42 million vs. $483,000—but that’s a significant drop from 4.4 times higher in February 2020.
Metros with the next-biggest gaps in home price growth—after San Francisco and Miami—are all pricey West Coast tech hubs paired with popular and relatively affordable Sun Belt metros:
- Seattle–Miami: -9.4% YoY versus +10.9% YoY—(for a gap of 20.3%)
- San Francisco–Tampa: -10.1% versus +7.7%—(for a gap of 17.8%)
- Seattle–Tampa: -9.4% versus +7.7%—(for a gap of 17.1%)
- San Francisco–Atlanta: -10.1% versus +6.6%—(for a gap of 16.7%)
Boom & bust: From the Great Recession to the COVID-19 pandemic
As evidenced by the home price growth variations during the Great Recession and during the COVID pandemic, these variations are at their widest during times of boom or bust.
In February, for most U.S. metros, the median home price changed within 10.6 percentage points of the national average (+0.4% year over year). So, price increases and declines fell into the following range: -4.9% to +5.7%. San Francisco and Miami were the outliers with the biggest price drop and increase.
From March through May 2022, metro-to-metro home price growth variation grew to a 13-year high with home prices climbing everywhere but with notable differences depending on location. Price variations for most metros increased to within 15.2 percentage points of the national average (+21.2% year over year in April 2022)—anywhere from +13.6% to +28.8% year over year.
During that time, legions of home buyers were migrating to relatively affordable Sun Belt metros like Phoenix and parts of Florida, untethered by remote work and motivated by low mortgage rates. Buyer demand in these areas skyrocketed, driving home prices way up, while home values appreciated more slowly in other regions of the country like the Northeast and Midwest.
The gap in home price growth across metros has narrowed somewhat over the past year as mortgage rates have climbed, sidelining buyers and sellers alike and slowing the housing market.
That gap is still wider than it was before the pandemic because home prices are dropping in many metros but still rising in others. San Francisco and Miami are two prime examples. Also, varying levels of buyer demand and inventory affect prices differently from one metro to another.
Let’s look at February 2020 as a pre-pandemic comparison. Back then, most metros saw home price growth within only three percentage points of the national average (+3.5% YOY), meaning they fell in the range of +2% to +5%.
The last time we saw the same degree of home price growth variation was in 2009, when home prices plummeted (to varying degrees) in certain areas thanks to the subprime mortgage crisis. In February of that year, home prices fell by a near-record 18.4% nationwide, with much steeper declines in some metros and much smaller ones in others.
Most saw their median home values change within 18.4 percentage points of the national average, creating an atypically wide range. For example, home prices in Phoenix fell 35.2% year over year while prices slipped only 4.6% in Dallas.
Extreme moments in history lead to extreme swings in home prices. During economic boom times, when many Americans are flush with cash, homebuying demand soars because many people have the means to buy both primary and vacation homes and perhaps move from one part of the country to another. That pushes prices up in certain places and grabs the attention of home flippers, who jump into the ring and push prices up even further. When there’s a recession like there was in 2009, or economic uncertainty and fears of a recession like in 2023, homebuyers quickly pull back and prices swing down in some areas.
Home price change in the 20 most populous U.S. metros:
- Miami, FL (10.9%)
- Tampa, FL (7.7%)
- Atlanta, GA (6.6%)
- Charlotte, NC (6.0%)
- Cleveland, OH (3.9%)
- Chicago, IL (3.6%)
- New York, NY (3.6%)
- Boston, MA (2.2%)
- Dallas, TX (2.0%)
- Detroit, MI (1.5%)
- Washington, D.C. (1.1%)
- Minneapolis, MN (0.5%)
- Denver, CO (-1.2%)
- Los Angeles, CA (-1.3%)
- Phoenix, AZ (-2.1%)
- Las Vegas, NV (-2.6%)
- Portland, OR (-3.2%)
- San Diego, CA (-4.2%)
- Seattle, WA (-9.4%)
- San Francisco, CA (-10.1%)
Read the full Redfin report for more details.
Takeaways for real estate agents
It’s not news that home price growth can vary widely from metro to metro—especially during times of boom and bust—but this serves as a helpful reminder to focus on local market trends. So, when you ask fellow agents in other metros what they’re seeing in their markets, keep in mind that their reality can be widely different from what you’re seeing in yours.
By all means, stay up-to-date on national trends—and check out markets your seller clients are planning to move into—but pay even closer attention to what’s happening in your local market. That’s the one that will matter most to the buyers and sellers in your area.