From skyrocketing home values to houses worth millions, here’s what’s driving today’s homebuying trend
The US housing market has undergone a dramatic transformation since the onset of the COVID-19 pandemic in March 2020.
In just five years, home values and rents have surged, million-dollar homes have become far more common, and homebuyers have changed how they shop for properties - perhaps permanently.
“A perfect cocktail of lower mortgage rates, higher savings, and a growing desire for space drove housing demand to new heights during the pandemic,” said Zillow senior economist Orphe Divounguy. “Just about every major market experienced price growth far above what they’d become accustomed to, resetting the financial bar for homeownership.”
Home prices and rents soar
Nationally, home values have jumped 45.3% since February 2020, packing a decade’s worth of typical growth into just five years
Miami emerged as the hottest housing market, with Tampa and Hartford also seeing some of the highest home value and rent increases since the pandemic began.
Austin, Texas, experienced the biggest boom-and-bust cycle. During the early pandemic frenzy, home values soared 40.3% year-over-year as demand skyrocketed. However, as mortgage rates rose and new construction increased, prices fell 14% in the year ending July 2023. Still, Austin home values remain 37.8% higher than pre-pandemic levels.
Despite higher borrowing costs, demand has remained steady. Amanda Lombardi, a mortgage broker at Lombardi Lending, told Mortgage Professional America that rising mortgage rates haven’t deterred many buyers.
“Buyers are buying like it’s their job right now,” Lombardi said in a November interview. “Interest rates increasing - I feel like it hasn’t really stopped the business. There’s been a few people who can’t afford it, and that’s a smart decision for them, but even people who are maxing out their budget are still moving forward because everything is more expensive, and they’re worried that home prices will never come down.”
In rental markets, New York City’s median asking rents have jumped 24.1% to $3,600 since the start of the pandemic, according to Zillow’s New York City brand, StreetEasy. The Bronx saw the sharpest increase, with rents climbing 42.3%, while Queens rents surged after affordability challenges in Brooklyn and Manhattan pushed renters into new areas.
Skyrocketing home prices have also reshaped the luxury market, with the number of $1 million homes more than doubling. Today, nearly 1.65 million properties nationwide are valued at $1 million or more - an increase of 989,000 since 2020.
Interestingly, today’s typical $1 million home is smaller than it was five years ago. Nationally, the average size has shrunk by 70 square feet to 2,388 square feet, still offering four bedrooms and three bathrooms. In cities like Indianapolis, Hartford, and Nashville, $1 million now buys homes that are more than 1,000 square feet smaller than pre-pandemic properties.
Construction surge puts cap on price growth
To meet surging demand, homebuilders ramped up activity, surpassing one million single-family housing starts in 2021 - the first time since 2007.
The cities that saw the most new housing construction since 2020, include Houston, Dallas, Phoenix, Atlanta, and Austin.
More new homes in these markets have helped slow price growth, offering some relief for buyers. But with mortgage rates rising, builders have shifted their focus to higher-density housing, such as townhomes and condos, to keep prices within reach while managing land and material costs.
However, future demand is uncertain. A key homebuyer sentiment index tracking expectations for purchases over the next six months dropped six points to 60, the first decline since June 2023, according to the National Association of Home Builders (NAHB) and Wells Fargo.
Yet, overall builder confidence increased in January, reaching its highest level in nine months, as foot traffic and current sales improved.
Read more: Higher mortgage rates cloud builder outlook
Virtual home shopping is here to stay
The home search process has changed significantly since 2020, with buyers relying more on virtual tools to narrow their choices before touring homes in person.
Zillow said the number of listings featuring 3D home tours has quadrupled since December 2022.
About 70% of buyers now say 3D tours help them understand a home better than static photos, up from 52% in 2019. Sixty-two per cent (62%) wish more listings included virtual tours, compared to just 46% in 2019.
Fewer buyers report wasting time viewing homes they would have skipped if better floor plans were available (50% now, down from 54% in 2020). The number of buyers attending five or more open houses has dropped from 17% in 2020, to just 7% in 2024.
"While the financial hurdle is higher, the home-shopping process has improved,” Divounguy said in the report. “Virtual tools are helping buyers make more informed decisions and reducing the time they spend on in-person tours."
Additionally, buyers prioritized function over aesthetics, favoring backyards over trendy interior features. That preference still holds today, with buyers paying up to 2% more for homes with outdoor kitchens, pizza ovens, and bluestone patios.
Even in high-density areas like New York City, demand for rentals with outdoor space soared 128% in 2023, according to StreetEasy.
However, not all pandemic-era trends lasted. Once-popular "cloffices" (closet offices), Zoom rooms, and exercise bike nooks have faded from demand. Listings featuring these trends have dropped by half since their peak.
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