Housing Market Had Incredible Gains in 2020
In a press release dated February 9, Zillow announced that the United States housing market gained about $2.5 trillion in value in 2020. This is the most value gained in a year since 2005. The housing bubble burst around 2007 to 2008, which triggered the Great Recession. Zillow states that the American housing market is worth about $36.2 trillion.
About the Housing Report
According to Zillow's Chief Economist, Treh Manhertz, 2020 was a record-breaking year for the housing market in the United States. There was a lot of competition among buyers, and that competition drove up home prices. Even though a lot of people had financial hardships as a result of the pandemic, those who didn't were able to buy the homes they had been planning to purchase. The low interest rates and newfound ability to work from home may have been what pushed those buyers over the edge in the decision to buy. A low inventory fueled the competition. A lot of buyers used Zillow to find a home that fulfilled most of the boxes on their wish lists.
Other Reasons for the Housing Boom
Builders were confident that all the houses they built in 2020 would sell. It turns out they were right. Housing starts and completions were down for 2020 as a result of the pandemic-related closures, supply chain problems and illnesses among laborers. Builder confidence is usually related to consumer demand. With more consumers demanding housing, builders plan to start more homes.
About the Market Analysis Performed By Zillow
The Zillow analysis suggests that 21.4% of the nation's housing market value is located in the state of California. Homes in California are worth a combined $7.8 trillion. That is more than the second-, third- and fourth-highest states combined. California is home to four of the 10 hottest metropolitan areas for home value. Those four areas are Los Angeles, San Diego, San Francisco and San Jose. The states with the smallest share of the American housing market were North Dakota, with $64 billion in housing value; Wyoming, with $70 billion in home value; and South Dakota, with $72 billion in housing market value. Alaska was the only one of the 50 states and Washington, D.C. that had a net loss of housing value. its housing stock was down 1.8% for 2020. The amount of Alaska's lost value is about $1.5 billion.
How the Housing Market Has Performed Over the Past 10 Years
Over the past 10 years, the total value of homes in six states has doubled. Those states include Idaho, Nevada, Utah, Arizona, Colorado and Washington. The New York City metropolitan statistical area retains the most housing value at $3.1 trillion. It is followed by Los Angeles at $2.8 trillion and San Francisco at $1.7 trillion. Of all cities, Los Angeles saw the most growth in 2020. Its housing value increased by $262 billion.
Where the Increase in Value Came From
The increase in market value is a result of several factors. Builders have built new homes, and those homes are generally high-end, single-family residences that are more than 3,000 square feet in size. Less than 5% of newly built homes qualify as affordable housing in the United States, and less than 2% of the newly built housing units in Los Angeles, New York or San Francisco are rated as affordable housing units. Some of the increase of value results from people adding onto their existing homes or making upgrades. For example, people who are now working from home may have added a half bathroom, finished their basements in order to have a home office or added a family room to create space for children who are in a remote or hybrid learning program through their school district. Some of the increase in home value is also from inflation. A big part of the increase is a result of low availability and high demand. People got into bidding wars, which ran up the prices from what the sellers listed when putting the home for sale.
More Housing News
In other housing news, the bidding wars declined in December. Remote work is allowing prospective buyers to expand their housing options. Some are more willing to live in a rural or suburban area, even if their office location is in the downtown area of a bustling city. If they don't have to drive there every day, they have more options. Home sellers enjoyed record profits in 2020, with home values hitting a six-year high.
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