California’s housing market remains the nation’s most valuable, according to a new Zillow report. Real estate in the Golden State reached $9.5 trillion last year, representing 19.5% of the national total. Florida moved into second place, edging out New York for the first time. Florida has eight of the ten fastest-growing housing markets in the country.
The combination of record-fast home value growth to start the year and a record number of newly built homes increased the total market value of residential real estate in the U.S. in 2022, despite price drops to end the year. California remains untouchable on its perch as the most valuable housing market in the country, but Florida was the big winner of 2022, jumping over New York into second place.
Here are the 10 states with the most valuable housing markets:
New York ($3.3T)
New Jersey ($1.63T)
North Carolina ($1.34T)
Population growth is the key to Florida’s big year in real estate
The increase in the total value of residential real estate can be attributed to both higher home values compared to the start of the year and a significant increase in the number of housing units from new construction. As always, the bulk of the increase came from higher valuations of existing homes, but last year’s increase in the housing stock plays a bigger role than usual as builders have raced to meet demand.
The secret to Florida’s rise up the total housing market value ranks lies in its population increase, which influences both home values and new construction. Florida saw the biggest population increase of any state last year, according to the U.S. Census Bureau, followed by Texas.
More residents mean more competition for homes, which puts upward pressure on prices. Likely as a response to this population growth, Florida and Texas also topped the list for the biggest increase in new housing units added in 2022, both in terms of the raw number of new units and the percentage increase those units represent.
It should be no surprise, then, that Florida (+$616 billion, or 20%) and Texas (+$328 billion, or 12%) saw the biggest gains in the total value of their housing markets last year.
Last year, eight of the 10 fastest growing metro areas were in Florida. Although the New York City metro area is the largest metro in the country, and thus still has the highest total real estate market value, Florida markets saw the biggest gains.
Early 2022 housing market gains were partially erased in the late 2022 cooldown
While the total market value of residential real estate increased in every state last year, the decrease in home values during the second half of the year eroded some of the gains made at the start of the year.
During the second half of 2022, home values fell across many U.S. markets as higher mortgage rates limited what many home shoppers could afford and chilled buyer demand.
California’s housing market had the most room to fall, and saw by far the biggest decrease in total value from July 2022 on — California’s housing market lost nearly $1 trillion during that time. Even Texas and Florida, the two big winners over the course of the year, saw significant dips late in 2022.
California was also one of only two states — Idaho was the other — for which more than half of the increase in total value last year came from new construction. In California, 62.4% of the increase in total market value over the past year was due to an increase in the number of housing units. This is compared to just 18.9% for the country as a whole. That’s a reflection of how deep the home value cuts were across much of the state. As home value appreciation looks likely to stagnate in 2023, new construction is likely to play a larger role in total market value gains.