Key points:
- Florida surpassed New York state to become the country’s second most valuable residential real estate market. Florida metros account for eight of the 10 fastest growing housing markets in the country.
- California remains the nation’s most valuable housing market, despite a housing slowdown that shaved nearly $1 trillion off the value of the state’s residential real estate. Roughly one-fifth of the nation’s total housing value is in California.
- More people moving to Florida, along with a high percentage of cash buyers, have resulted in an active housing market.
Florida may not be as populous as California and Texas, but it's quickly becoming one of the most valuable housing markets in the U.S.
The Sunshine State now ranks second in the nation for residential real estate market value, according to a new report from Zillow. Florida's real estate market value at the end of 2022 was $3.62 trillion.
That's still well behind California's $9.52 trillion, but enough to pass New York's total of $3.32 trillion. Texas came in at No. 4 with $3.16 trillion, even though the state has several million more people than Florida. Washington state rounded out the top five with a market value of $1.63 trillion.
A combination of rising home values and a surge in construction helped push Florida above New York, said Zillow Senior Economist Orphe Divounguy.
"As always, the bulk of the increase came from higher valuations of existing homes, but last year's increase in the housing stock plays a bigger role than usual as builders have raced to meet demand," Divounguy said.
All but a handful of states had above-normal jumps in overall market value, Divounguy said in an email. Florida experienced a growth rate that was more than double its recent average, though some states, like Connecticut, posted even higher growth rates.
Population growth is the key to Florida’s big year in real estate
Florida's popularity continues to defy the overall market slowdown. It's consistently been one of the most popular places to move to, which helped it become the fastest-growing state in 2022.
Buyer interest has continued into early 2023, with pending home sales and showing appointments rising in South Florida in January, according to data from the Miami Association of Realtors.
"Miami is a unique market because of our high percentage of cash buyers, surging migration and soaring number of international and domestic buyers," said Ines Hegedus-Garcia, Miami Association of Realtors board chair. "Miami is shielded in a sense from interest rate hikes because of those fundamentals. While other major U.S. markets are seeing decreasing prices, the Miami market is still very strong and still appreciating."
Among metro areas, Florida cities also dominated, accounting for eight of the top 10 areas for market value growth. Lakeland, east of Tampa, came in first with a 25.3% rise in overall market value. The only non-Florida communities in the top 10 were Charleston, North Carolina (up 21.2% year-over-year) and Syracuse, New York (up 20.2%).
Most states relied on current homes for market value increases, but two states — California and Idaho — had more than half of the value increase come from new construction, according to the report.
In California, 62.4% of the increase in home values came from newly built homes, well above the U.S. average of 18.9%. "That's a reflection of how deep the home value cuts were across much of the state," Divounguy said.
For 2023, Divounguy expects Florida to remain near the top as it continues to experience rapid population growth.
"It is no longer just retirees moving to Florida. Millennials are also moving to the region," Divounguy said.
While Florida's home values are expected to keep growing this year, some states could see year-over-year declines, Divounguy said.
"California and Idaho are getting closer to the edge," Divounguy said. "With housing affordability being a major challenge, the most expensive metros in the country have seen a slowdown in demand but also a large decline in the number of housing starts. This makes sense: builders are essentially telling you where demand will be next year. A big slowdown in new building permits and starts do not bode well for the total value of residential real estate."