House Prices Are Becoming Most Unaffordable in These Five Cities

After skyrocketing in 2022, house prices across the U.S. have fallen in the past few months, to the relief of many aspiring homebuyers—but some areas of the country remain significantly unaffordable.

Since 2019, affordability for home buyers has fallen the furthest in the cities of Los Angeles and San Diego (California) and North Port/Sarasota, Naples and Miami (Florida).

According to Zillow, the average Los Angeles home value is $913,079, down 5 percent over the past year, and goes to pending in around 15 days. The average San Diego home value is $912,745, down 4 percent over the past year. The average North Port home value is $361,621, up 1 percent over the past year.

The average Naples home value is $585,469, up 3.7 percent over the past year. The average Miami home value is $553,743, up 8.5 percent in the same period.

At a nationwide level, the average U.S. home value is $346,270—a number that's significantly lower than any of the cities listed above.

But why have these cities become the most unaffordable in America? Nicole Bachaud, Zillow senior economist, told Newsweek that all these places have something in common that contributed to high home prices.

"They're all sunny, oceanside destinations—a significant common denominator when considering the drastic expansion of remote work as well as a wave of retiring Baby Boomers," Bachaud said.

"Los Angeles and San Diego were some of the most expensive metros in 2019 and that hasn't changed. Although median income in these areas rose over the last four years, it did not keep up with skyrocketing prices," she added.

Another factor that has contributed to boosting prices in these cities to the point of unaffordability for many, it's the lack of available housing inventory.

This supply shortage—which has been and remains nationwide—has contributed to falling affordability across the U.S., Bachaud said, "but these Southern California metros have a bigger issue than most."

San Diego's inventory is down 60 percent compared to 2019, the third highest drop in the nation, while Los Angeles' decline of 51 percent over that same period is significantly larger than the national average of 46 percent.

"Florida has seen a major influx of in-migration over the course of the pandemic, drawing remote workers and retirees by offering sun-drenched coastal living at a serious discount compared to California," Bachaud said.

What's relatively surprising is that prices are still rising in these cities—with the exception of Los Angeles and San Diego—despite the fact that the pandemic is long gone and people are not moving as much as they were. However, in these areas, inventory is still historically low.

"Very few homeowners are putting their homes on the market as a result of high mortgage rates," Bachaud said. "Zillow data shows new inventory at a record low for this time of year."

According to Bachaud, "the majority of existing homeowners locked in mortgage rates under 4 percent and are staying put instead of joining in on the spring home shopping season, where they're finding higher prices and higher rates than they have on their existing homes."

Another problem on top of the supply deficit is that "there is also a general housing shortage that we've been dealing with since the Great Recession," Bachaud said.

Recent Zillow research showed that the U.S. is short by 4.3 million homes, including rentals and for-sale homes, and that shortage is forcing millions of families to double up in shared homes. "While the new construction market is making moves to come back to full home-building capacity, it could take years to build us out of this housing supply deficit," Bachaud said.

"Despite affordability challenges, the low inventory in this market has led to a surprisingly competitive spring," she added. "It's a few degrees cooler than the peak of the pandemic, but still moving faster than most years."

Higher mortgage rates have shrunk the pool of buyers, Bachaud said, but because there are so few homes, buyers who can afford to stay in the market are competing over what's out there.

"This competition, especially at the lower end of home prices where many are now looking due to demographic trends and affordability constraints, is putting pressure on prices," Bachaud said. "Relatively affordable markets east of (or on) the Mississippi River are seeing the strongest monthly appreciation: Chicago (IL); Buffalo (NY); New Orleans (LA); Hartford (CT); and Detroit (MI)."