Years of rising prices and a prolonged period of increasing mortgage rates have made one issue top of mind for most homebuyers: affordability. That favors markets in the Northeast and Midwest, where prices are lower, and comes at the expense of markets in the West, where prices are higher, recently published data from Zillow suggest.
Take the Zillow Home Value Index. It measures the typical home value for single-family residences, condominiums and co-ops in the 35th to 65th percentile within their region. It is smoothed and seasonally adjusted, and data for August were published Sept. 21.
While Zillow’s national HVI was basically flat year-over-year at $349,770, several states in the Northeast and Midwest saw gains of 2-5%, with Connecticut leading the nation at 6.4%.
Most Western states’ value index, meanwhile, fell about 2-8%, with Idaho falling farthest at 8.3%. The actual value index, however, remains highest in the West. Hawaii’s $841,000 and California’s $744,000 index values in August were the highest in the nation by far.
Homebuyers’ shift from the West to other regions of the country is also a shift from expensive locales to affordable ones, based on Zillow’s home value index data for the 100 largest MSAs.
With the exception of New Orleans, the 10 cities with the biggest year-over-year drop in typical home values were all more expensive than the 10 cities with the biggest year-over-year increase in home values.
As an extreme example, the typical home value in McAllen, TX – which saw the 10th largest increase in home values – was just $178,000, while the typical home value in San Francisco – which saw the 6th largest decrease – was more than $1.1 million.
Similarly, the list of cities that saw the highest percentage of active listings with price cuts in August is topped by Western cities like Boise City, Colorado Springs and Salt Lake City, while the list of cities with the lowest percentage of price reductions is dominated by cities in Connecticut, New York and Wisconsin.
Zillow’s recent data reinforces the notion that Northeastern and Midwestern housing markets are gaining at the expense of those in Western states, a notion also supported by CoreLogic data on repeat sales, rent and foreclosures and Realtor.com “market hotness” scores, which factor in property listings’ views.
For the nation as a whole, home values have hardly changed since August 2022 by Zillow’s estimation in its Home Value Index. Valuations remain propped up by tight inventory, and inventories have tightened further year-over-year, according to Zillow’s smoothed count of active unique listings.