The pandemic real estate surge did little to shake up metro-level price ranks, with California housing markets still the nation’s most expensive
The overall U.S. real estate market looks wildly different in 2023 than it did three years ago. Prices have increased by 40%, the total value of real estate has moved up from $33 trillion to $44 trillion dollars and borrowers generally saw their home equity increase.
Despite all this, the Metropolitan Statistical Area (MSA) landscape still looks remarkably the same, and the most expensive U.S. housing markets in early 2020 were almost all still the priciest this spring. Table 1 below shows the 10 most expensive housing markets in the U.S. by median sales price in January 2020 compared with March 2023. The two data sets are remarkably similar, with eight of 10 of MSAs remaining the same, nearly all of which are in California.
Most Expensive U.S. Housing Markets: January 2020 Versus March 2023
|MSA||January 2020 Median Price||MSA||March 2023 Median Price|
|San Francisco, CA||$1,250,000||San Francisco, CA||$1,400,000|
|San Jose, CA||$911,500||San Jose, CA||$1,228,500|
|Anaheim, CA||$750,000||Anaheim, CA||$965,000|
|Oakland, CA||$650,000||Oakland, CA||$825,000|
|Los Angeles, CA||$620,000||Oxnard, CA||$781,000|
|Urban Honolulu, HI||$596,000||Los Angeles, CA||$774,000|
|Salinas, CA||$585,000||San Diego, CA||$770,500|
|San Diego, CA||$582,500||Salinas, CA||$725,000|
|Oxnard, CA||$580,000||Santa Barbara, CA||$704,500|
|Santa Rosa, CA||$575,000||Seattle, WA||$700,000|
Table 1: U.S. MSAs with the highest median sales prices: January 2020 and March 2023
This holding pattern is not specific to just the more expensive areas of the country. Figure 1 shows MSA ranks in 2020 compared to 2023, with 0.0 representing the least expensive and 1.0 representing the most expensive U.S. housing markets. The correlation between the most and least expensive MSAs is nearly perfect at 0.98.
Notice that the points lay particularly close to the best-fit line in the corners, indicating that the most and least expensive MSAs were the least likely to move position over the last three years. On the opposite side of the coin from the California housing markets listed above, Rust Belt cities like Detroit, Cleveland and Rochester, New York remain among the least expensive housing markets in the country, as seen in Figure 1 below.
Price Rank by MSA: January 2020 Versus March 2023
The movement that did happen was mostly in the middle of the spectrum (Notice how the points show much more dispersion between 0.2 and 0.6 on the bottom axis of Figure 1) . The fastest-appreciating markets were mostly in Florida, including Cape Coral-Fort Myers, which moved up 30 spots to become the 60th most expensive MSA amongst the top 150. Tampa moved up 16 spots from 80th to 64th and North Port-Sarasota-Bradenton moved up 18 places, rising from 57th to 39th.
But relative housing prices cannot move up in some MSAs without trending down in other places. Interestingly, the MSAs that saw appreciation drop the most are far more geographically diverse than those that moved up the list. For instance, the three markets with the largest declines were Minneapolis, Baltimore and New Orleans, which dropped to the 19th, 18th and 16th spots, respectively. Other metros that are decelerating include Philadelphia (104th to 117th); Des Moines, Iowa (101st to 113th); Corpus Christi, Texas (88th to 100th) and Milwaukee (100th to 110th).
Much has been made of home price declines on the West Coast and the appreciation in Florida, but examining ranks rather than percentage changes adds a greater perspective to these trends. Indeed, factors such as remote work and mortgage rate increases, combined with high home prices, may have shifted demand to more affordable areas and shrunk the dispersion of prices across metros. However, this shift has created little change in the most expensive and least expensive housing markets in the U.S.
The price gap between buying a house in California and Florida is now closer than it was, but prices in the two states are unlikely to ever fully converge. As the price gap shrinks, the California housing market will again become relatively more attractive, and homebuyers will begin to return. It is likely that this migration will occur before California MSAs become cheaper than other U.S. areas.
Even after adjusting for relatively higher wages, the most expensive housing markets in the U.S. are still largely in California, implying that their value is driven as much by outdoor amenities and weather as a strong economy . West Coast housing markets were expensive even before the tech boom redefined the landscape: The most expensive MSAs in January 2000 (the earliest month recorded in CoreLogic’s Market Trends data) were San Francisco and San Jose.
Overall, the MSAs where prices are dropping have a long way to go before meeting the places where prices are still rising. If that gap shrinks enough, demand may reorient itself to more expensive areas, and price drops could begin to spread. The consistency of the pricing hierarchy raises the possibility that all U.S. housing markets are experiencing the same cycle, just at different times.
Indeed, the CoreLogic S&P Case-Shiller Index recently began to gain steam again, showing a 1.3% monthly increase in April 2023, and this increase was driven by increases in West Coast MSAs like San Francisco, San Diego and Seattle. Meanwhile, CoreLogic’s latest Market Risk Indicators show that four metro areas in Florida rank in the top five markets for those at most risk for price declines in the next 12 months.
 This is partially just a function of opportunity. The top and the bottom have less room to move because they can only go in one direction. For instance, if prices in San Francisco increased by 20% and the rest of the country saw a 10% gain, it would not move up the distribution but just remain at the top. If the same thing happened to Baltimore (the median MSA), it would move up 14 spots.
 Albouy, D. (2008). Are big cities bad places to live? Estimating quality of life across metropolitan areas (No. w14472). National Bureau of Economic Research.