New York drops to third most valuable housing market as national market rebounds: Zillow

The value of the U.S. residential housing market has rebounded after a short downturn and is now worth a record-breaking $52 trillion, according to Zillow.

The downturn from July 2022 to January 2023 was a "temporary hiccup" as higher mortgage rates led to slower sales and contributed to a dent in the overall value, according to a report released last week by Zillow. Now in just the past year, the market has grown $2.6 trillion.

Zillow economist Orphe Divounguy largely attributes the growth to new homes coming online this past spring and summer, and says the trend could be here to stay.

"With many homeowners opting to stay put and hold onto their low mortgage rate, new home sales should make up a bigger piece of the home sales pie moving forward," he wrote in the report.

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Zillow's housing market snapshot

• Total worth: $51.94 trillion
• The total value is 49% higher than before the pandemic
• The total value has jumped $2.6 trillion in just the last year
• Home prices rose 1.3% over the last year on average

Florida surpasses New York for the second most valuable market

California has a stronghold as the state with the most valuable housing market, coming in at more than $10 trillion, accounting for more than 20% of the entire country's worth. But Zillow's data shows that its total value is still slightly lower than its peak in May 2022.

But Florida, being the fastest-growing state in the country, has edged its way in front of New York for the No. 2 spot. Texas and New Jersey hold the fourth and fifth spots, respectively. Massachusetts, which was ranked fifth before the pandemic, has fallen to sixth. Washington, which was fifth a year ago, is now ranked seventh.

Miami has also booted Washington D.C., from the top five most valuable metro areas. The rest of the cities — New York, Los Angeles, San Francisco, and Boston — have held their top spots throughout the last four years.

More: Is your ZIP code on the hottest list for 2023? Here's which cities made the top 10.

High mortgage rates pushing down inventory

At 7.3% the week ending Sept. 28, the 30-year fixed-rate mortgage hit the highest level since 2000, according to Freddie Mac.

Even so, it's still a seller's market. The housing inventory deficit, which Divounguy says is driving new construction, means that homes have been flying off the market quickly after they are listed.

For homeowners who bought their homes at lower mortgage rates, they are staying put, further exasperating the inventory issue.

Total housing inventory at the end of August was 1.1 million units, down 0.9% from July and 14% from one year ago (1.28 million), according to the National Association of Realtors.

Contributing: Swapna Venugopal Ramaswamy