2021 Housing Market in Review: Sky-High Home Prices, Ultra-Low Supply
In a record year for the housing economy, Austin, Texas nabbed the top spot as the hottest single-family home market in the U.S.
In 2021, the housing market drew plenty of headlines as a dwindling supply of homes available for purchase led to properties flying off the market at all-time high prices across the U.S. As millions of American families continued to explore new terrains given the ability to study and work from anywhere, the nation’s residential real estate landscape changed along with them.
Here are the top five market trends we witnessed coming out of 2020 and into 2021 and some of what we might be able to expect in 2022:
Austin earns top spot as hottest single-family home market in the U.S.
Since the beginning of 2021, the median listing value for homes in the Austin, Texas metropolitan area has jumped 38.6%, from $361K on Jan. 1 to $499K by the end of the year. This eye-popping price increase pushed Austin’s growth well ahead of second place Jacksonville, FL, which had its own banner year with a 24.8% increase in listing prices. Despite Austin taking the undisputed top spot for 2021, Florida’s smaller metros clustered in to follow, with 8 cities across the state seeing price growth of 20% or more.
While Florida was the real estate story in the east, the West’s wild year in housing didn’t stop in Texas. Both Texas and Arizona saw nearly identical 20% increases in list prices statewide, while Las Vegas, NV led all metros west of Austin with a 24.6% increase in median price for 2021. However, an interesting trend continues to unfold just west of the Rockies. Following a robust 2020, metros along the Interstate 84 corridor stretching from Utah to Idaho have continued last year’s price boom throughout 2021. Boise, Idaho has seen an incredible 46.9% increase in median listing prices dating back to the start of 2020, while neighboring Utah cities Provo, Ogden and Salt Lake City all experienced price hikes between 34% – 40% in that same timeframe. Throughout 2020 and 2021, Idaho and Utah have jockeyed for the highest statewide median price increases in the U.S., with Idaho ultimately winning out with a 51.4% price surge over the past 24 months, indicating even stronger market activity in its smaller towns than in bustling Boise.
This trend cannot be simply written off as a COVID-era anomaly. From 2010 to 2020, Utah and Idaho have led the nation in population growth, with 18.4% and 17.3% increases, respectively. Their jump in property values reflects that growing trend and looks unlikely to slow down in 2022.
O Supply, supply, wherefore art thou supply?
2021 was undoubtedly defined by a nationwide shortage in the number of available homes for purchase amid surging demand, driving prices higher for both renters and homebuyers. From a lack of lumber needed to construct new homes to a decreasing number of existing properties up for sale, families across the U.S. have felt the squeeze – especially first-time homebuyers searching for affordable properties. Homes under $200K have been scarce all year long, with the number of available properties falling 19% in 2021, compared to a 40% annual increase for homes above $600K.
While many metro areas have seen a rise in single-family property listing availability since January 2021, virtually no areas have seen a return to pre-COVID levels. The only outliers? Syracuse/Buffalo, New York and Spokane, Washington.
Did the advent of remote work see California lose its popular status? Not so fast
As remote work soared in popularity in 2021 – especially among the tech crowd – stories of ultra-rich Silicon Valley CEOs ditching the high-tax region for more cost-friendly states like Texas and Florida were plentiful. Sure enough, many California cities, led by San Jose and San Francisco, saw stale or decreasing list prices during 2021.
But while people may have moved out of the more expensive metros, the data suggests they did not move far, or even out of California. Since the onset of the pandemic in March 2020, the Golden State has seen median listing prices increase by 24.9% — fifth highest in the nation behind neighboring western states Idaho, Nevada, Arizona, and Utah. Smaller metro areas such as Riverside/San Bernardino, Bakersfield, and Fresno saw healthy demand, leading to price increases of between 16-18% in 2021. Sellers outside of the major metros are continuing to list their properties even higher, indicating that decreased demand in cities like San Francisco might not bring any downward pressure on prices statewide in the near-term.
Renters had a particularly tough year
In the single-family property rental market, there was little in the way of good news for renters in 2021.
The effect of the supply crunch hit everyone hard, but especially so in Florida, where the number of available listings plummeted, leading to steep increases in rental rates. Eight of the top 10 metro areas seeing significant price increases in 2021 were in Florida. Tied at the top of the list were two metros along Florida’s gulf coast stretching from Cape Coral to Bradenton, where rental rates rose 53.5% in 2021 alone, accelerating a trend that has now seen median rents more than doubling from $1,700 per month to start 2020 to over $3,800 today.
While Texas cities claimed the highest number of available rentals overall, it wasn’t enough to bring down prices as demand for properties remained high throughout the year – Austin saw rental rates go up by 15%.
One outlier to the trend was San Jose, California, where prospective renters saw a slight 2% decrease in rental rates in 2021.
Supply shortage and price growth trends are likely to continue in 2022
As 2021 comes to a close, the nation’s housing supply is dwindling once again as homes continue to sell at record prices – bucking the trend that typically sees market activity cool down in the winter months. In November, the number of net new property listings on the market was down nearly 15% from 2020, while the median closed price of all single-family listings rose 14.6% year-over-year.
Given this, the shortage of homes for sale will likely extend well into 2022, setting the stage for additional price growth in the spring – albeit likely at a lower rate than the record rise we saw throughout 2021.
