U.S. Housing Market Sees Record Drop in Value and Investor Purchases in 2022

It’s been a tumultuous year for the U.S. housing market. According to a report from real estate brokerage firm Redfin, the total value of U.S. homes tumbled from a record high of $47.7 trillion in June 2022 to $45.3 trillion at the end of the year — a decline of $2.3 trillion, or 4.9%.^[0] This marks the largest June-to-December drop in percentage terms since 2008’s housing crisis, when home values slumped by 5.8%.^[1]

Rising mortgage rates have made buying a home more costly, which is one of the primary causes of the decrease in homebuyer demand.^[2] In December, the average 30-year fixed mortgage rate was 6.36%, a figure that has doubled since the beginning of 2022.^[3] Rates dropped in the early part of February, but have since risen back to their December state.^[4]

In the fourth quarter, year-over-year purchases of single-family homes by investors dropped a record-setting 49.8%, exceeding any other type of property.^[5] Purchases of condos/co-ops by investors dropped 35.6% while acquisitions of townhouses and multi-family properties both decreased by 31.1%.^[6]

Roughly one-third (31.2%) of home purchases were paid for with all cash in December, according to a new report from Redfin.^[7] The percentage had risen from 28.8% in the previous year, yet it was lower than the peak of 31.9% observed in November, the highest in^[8]

A report revealed that in 56% of Opportunity Zones in the U.S., the median prices of single-family homes and condos decreased from the third to the fourth quarter of 2022, and decreased by at least 5% in nearly half of these zones.^[9] Declines in the zones closely matched those in other neighborhoods as home prices dropped throughout the US during the latter half of 2022, following a decade of steady expansion.^[9]

The total value of homes in Miami increased by 19.7% to $468.5 billion in December compared to the previous year ($77 billion), making it the metro area with the greatest annual increase in percentage terms according to Redfin analysis.^[10] In December, Miami's housing market was valued at approximately $472 billion, which was the same as when it reached its highest point in July.^[3]

0. “US housing market sees $2.3T drop in value, biggest since 2008” Fox Business, 23 Feb. 2023, https://www.foxbusiness.com/economy/us-housing-market-sees-drop-value-biggest-2008

1. “US Housing Market Posts $2.3 Trillion Drop, Biggest Since 2008” Bloomberg, 22 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-22/us-housing-market-posts-2-3-trillion-drop-biggest-since-2008

2. “U.S. home values slump by $2.3T since June peak, Redfin says (NASDAQ:RDFN)” Seeking Alpha, 22 Feb. 2023, https://seekingalpha.com/news/3939136-us-home-values-slump-by-23t-since-june-peak-redfin-says

3. “Redfin: $2.3T In Home Values Lost In 2nd Half Of '22” National Mortgage Professional, 22 Feb. 2023, https://nationalmortgageprofessional.com/news/redfin-23t-home-values-lost-2nd-half-22

4. “Suburban Housing Markets Faring Better Than Cities” DSNews.com, 22 Feb. 2023, https://dsnews.com/news/02-22-2023/suburban-housing-markets

5. “Investors Are Buying Roughly Half as Many Homes as They Were a Year Ago” Redfin News , 15 Feb. 2023, https://www.redfin.com/news/investor-home-purchases-q4-2022/

6. “Investors Purchases of Single-Family Homes Drops By Almost Half” Route Fifty, 17 Feb. 2023, https://www.route-fifty.com/infrastructure/2023/02/investors-purchases-single-family-homes-drops-almost-half/383128/

7. “Where Cash Is King: 10 Cities With the Highest Share of All-Cash Home Sales” Money, 17 Feb. 2023, https://money.com/cities-most-cash-home-sales

8. “Redfin Reports Share of Homes Bought With Cash Ticks Down From November Peak” Business Wire, 15 Feb. 2023, https://www.businesswire.com/news/home/20230215005284/en/Redfin-Reports-Share-of-Homes-Bought-With-Cash-Ticks-Down-From-November-Peak

9. “HOME PRICES IN OPPORTUNITY ZONE REDEVELOPMENT AREAS FALL DURING FOURTH QUARTER” PR Newswire, 16 Feb. 2023, https://www.prnewswire.com/news-releases/home-prices-in-opportunity-zone-redevelopment-areas-fall-during-fourth-quarter-301748422.html

10. “Real estate: US homeowners have lost $2.3 trillion since June: Redfin data” Yahoo News, 22 Feb. 2023, https://news.yahoo.com/real-estate-us-homeowners-have-lost-23-trillion-since-june-redfin-data-194008081.html