U.S. Home Prices Surge: 50% Jump In Five Years

In just five years, the cost per square foot for an average U.S. home has surged by 52.7%.

While the overall median list price has increased by 37.5% since 2019, the spike in per-square-foot costs points to a burgeoning premium on smaller urban dwellings, especially in high-demand areas like New York City, Boston, and Nashville.

The trend in Realtor.com's monthly housing report marks a shift in the housing market that may affect buyer preferences and urban housing policies. Ralph McLaughlin, a senior economist at Realtor.com, argued that the price-per-square-foot metric may be more important than the list price as it provides a clearer gauge of real estate value changes over time compared to overall list prices, which can be skewed by the types of homes being sold.

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The senior economist said in the report, "The median list price can fluctuate even if the market is stable. For instance, an increased share of smaller homes on the market could lower the median list price without affecting the overall value of homes."

As remote work policies have taken root, cities offering optimal living conditions within a reasonable commute have tightened their housing markets. That shift has led to price spikes, particularly in regions providing additional space for home offices.

In the New York City metro area, the price per square foot has soared by 84.7% since 2019. Boston and Nashville also saw increases, at 72.9% and 68.6%, respectively, propelled by intense demand and limited supply due to shifts in residential preferences due to changing work patterns.

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"As remote and hybrid work arrangements became more common, buyers flocked to areas that offered bang for their buck within a reasonable commute," Hannah Jones, a senior economic research analyst at Realtor.com, said in the report.

Conversely, cities like Detroit, Baltimore, and San Jose saw the smallest gains in price per square foot, with increases of 23.2%, 24.8%, and 26.3% respectively. The figures suggest a more tempered market response, possibly influenced by slower growth in demand compared to their more bustling counterparts.

For instance, the national median list price of $442,500, coupled with a 3.8% rise in cost per square foot, points to a market that increasingly values location and quality over sheer size. The move is more evident in cities where the work-from-home trend has persisted, allowing people to prioritize lifestyle over proximity to traditional commercial hubs.

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