Top Percentage Increases: Of the top cities with the most staggering increases, four are in the United States. Detroit reported a stunning 97% growth. San Francisco comes in third, while Seattle and San Jose rank eighth and tenth.
Detroit 97% growth translates to a mere $30,000 net increase. Compared to San Francisco, that’s a trifle. The Golden Gate City boasts a $550,000 upsurge in just five years, an amount that could easily get you another house in many cities across the country. San Jose is not far behind with a net growth of $355,000 whereas homebuyers in Seattle must dish out an additional $278,000 to become homeowners compared to five years ago;
Price Drops: None of the top largest U.S. cities experienced any price drop in the last five years. Incomes in North America have risen slowly and steadily since 2013, but have been no match for home price growth.
Growing Interest in Urban Living
Compared to just five years ago, 40 cities in the U.S., 31 in Mexico, and 10 in Canada have seen significant home price hikes, putting considerable strain on the average homebuyer. With more and more people opting for a connected, urban lifestyle, and with the younger generation’s desire to reduce commute time, demand for urban housing is skyrocketing.
Aside from the growing demand, large cities’ restrictive land use and zoning policies push home prices higher, making housing an increasingly challenging issue on North America’s most developed and attractive markets.
Moreover, according to an analysis by CityLab, geography may play a huge role in a city’s potential for development: cities that do not have enough space to expand once they start developing economically might suffer in the long run.
And usually it is the homebuyers who pay the price, quite literally, because the rising costs of real estate development in tightly-controlled land zones will have a major impact on final home prices, no matter their type.
As a result, housing affordability is becoming increasingly problematic in many cities across North America. While the traditional rule of thumb – that a homebuyer should afford a home if its value is three times or less the annual household income – still holds in some markets, others are far more expensive than that.
Five-Year Home Price Upsurge in North America’s Largest Cities
To look at one of the most extreme cases, Canadian prospective homebuyers could have bought a home in Surrey, B.C., for around $450,000 (Canadian dollars) in 2013, but they currently need almost double that: $845,500. Vancouver, B.C., follows suit, with a 68% increase in the past five years, and Brampton, Hamilton, and Mississauga, all three cities located in Ontario, are almost at a tie, with increases hovering around 66%.
In the U.S., Detroit stands out, with home prices that have doubled since 2013. For a city in recovery, severely affected by economic setbacks and demographic decline, increasing home prices might just be a sign of a local economy on the mend.
San Francisco saw the second highest jump, with a home price increase close to 69%. The other talent and tech hub on the West Coast, Seattle, boasts the third most significant price gain (66%).
The study looks at the 50 largest metropolitan areas in the U.S. to see where housing prices have recovered the most since the height of the Great Recession — and where values are still struggling. The study also looks at how income and unemployment rates have changed since 2009.
That study found that housing prices have rebounded from their lows during the Great Recession and are now starting to cool. In many cases, home values have even exceeded their 2006 highs.
LendingTree found that on average, median home values have increased by nearly $50,000 across the 50 largest metros in the United States since 2009. Increasing incomes and falling unemployment rates have likely fueled this increase, the researchers said.
Prices have fallen in four metros since 2009: Hartford, Conn., Chicago, Virginia Beach, Va., and Baltimore. On average, these areas have seen home prices fall nearly $6,700. According to LendingTree, "It is difficult to blame these results on a single factor, but, in many of these areas, a lack of strong employment opportunities and out-of-state migration might play a role."