5 Cities are Driving the Surge in Housing Values

As people fled cities looking for more space during the pandemic, US home values surged 13.4%, or $4 trillion, to reach $33.4 trillion in February 2021 from $29.4 trillion in February 2020, according to a new report from Redfin.

Five cities— Jacksonville, Fla., Austin, Texas, Charlotte, NC, Phoenix and Sacramento, Calif.,–helped drive the Redfin gains. Redfin notes that these “relatively affordable, sunny destinations” attracted homebuyers from dense, coastal cities.

Jacksonville led the way. In the city, home values jumped 21.1% year over year (YOY) to $165.9 billion in February 2021. Austin (+17.9%), Charlotte (+17.3%), Phoenix (+16.1%) and Sacramento (+14.8%) followed the Florida city. The next five cities in appreciation were Detroit, Milwaukee, Riverside, Calif., Providence, RI and West Palm Beach, Fla. Each of those metros saw market-value increases of more than 12%.

In Jacksonville, Charlotte, Detroit and Milwaukee the median home price was still below the national level ($342,326) in January, according to Redfin.

“A lot of cash buyers are coming to Jacksonville from big cities like LA to take advantage of lower taxes, and they’re offering sellers well over their asking prices,” said local Redfin real estate agent Heather Kruayai in a prepared statement.

While Austin, Phoenix and Sacramento have been attractive migration destinations during the pandemic, Austin boasted the largest net inflow of residents than any other major metro in January, according to Redfin. Almost half, 45%, of the Redfin home searches in Austin in January came from people outside the area. In January 2020, 32.6% of searchers were outside of the market.

And when these people move, they’re often coming with larger budgets than the locals. For instance, the average housing budget for out-of-towners relocating to Austin in 2020 was $852,276, according to Redfin. That was 32.2% higher than the $644,771 average budget for local buyers.

The rise in home prices has had one significant side effect, according to Redfin. In January, the business formation was up 66% YOY in Texas. In the rest of the country, growth was 58%. Redfin attributes part of this to many entrepreneurs using their home equity as a collateral source to secure financing for their businesses.

Other housing reports have also shown strong home price appreciation in a white-hot housing market. Home prices jumped 10.4% year-over-year in December, which was an increase from the 9.5% posted in November, according to The S&P CoreLogic Case-Shiller US National Home Price NSA Index. The 10.4% gain marks the best performance of housing prices in a calendar year since 2013. 

“These data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig J. Lazzara, managing director and global head of Index Investment Strategy at S&P DJI. “This may indicate a secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway.”