With the significant surge in home prices across the U.S. in the past year – which we’ve covered extensively – we thought it would be interesting to see how much these prices have changed since the previous market peak in Q3 2006. Figure 1 below shows median existing single-family home prices expressed on a sold-price-per-square-foot of living area for several top core-based statistical areas (CBSAs). Most of the differences in prices are a function of the value of the entitled land. As we have discussed in the past, we use this metric, rather than median or mean price, since it helps normalize the sales prices for different size homes and it is more representative of the typical home. Note the wide range of these prices, with San Francisco clocking in at $987/square foot and far exceeding Los Angeles at $490 and Seattle at $347. In contrast, half of all CBSAs we took a look at are currently running below $200/square foot, which is more in line with the overall U.S. single family median of $170/square foot.
Figure 1: Price Dispersion Evidence
The percent change in single-family price per living area from the previous Q3 2006 values are shown in Figure 2. Note that for a number of major CBSAs, such as New York, Washington D.C. and Chicago, prices are now only back to where they were 15 years ago. Dallas and Houston are among the top gainers since 2006, rising approximately 81 percent and 65 percent, respectively. These two markets did not experience price bubbles – and subsequent busts – prior to the global financial crisis in 2008, which has been a key factor in their being among the leaders regarding price appreciation since that time.
Among the top six markets for appreciation, all but San Francisco are in business-friendly states. North Carolina ranked first on the Forbes list of business-friendly states, Texas ranked second and Georgia sixth, Washington #8 and Colorado was #9. San Francisco ranked high for tech-related jobs, yet one of the most difficult places to add new housing supply.
Figure 2: Peak-to-Peak Appreciation
Since the pandemic began, we have discussed a number of internal market indicators which we closely track on a regular basis. In most cases, these have been exhibiting historical extremes (e.g. lowest sold market times, lowest months of inventory remaining, highest sold-to-original list price). Another indicator which we track is a comparison of the median sold price per living area versus the same for newly listed homes.
Figure 3 below shows these two series for the Las Vegas CBSA dating back to 2005. As expected, these two series track one another closely over time, with the new list price per living area series averaging about 5% more than the sold price series. During the last half of 2020, we witnessed many metros with bidding wars and a high frequency of selling prices above list prices. More recently, sellers like those in Las Vegas are raising prices, as seen in the steep upward slope of the recent listing prices.
In reviewing our Daily Market Flash charts, which cover hundreds of CBSAs, we note again several where the median sold price per living area is, for the first time, actually above the new listing price. One example is Austin (shown below) which has been one of the nation’s hottest markets, with the crossover having occurred in February of this year. This pattern will not last, as sellers will soon be raising list prices as they have in Las Vegas, shown above.