A short 5 years was enough for cities like Surrey, CA, San Francisco, US, and Mexico City, MX to post home price jumps that would make your head spin. As a result, prospective homebuyers in North America’s largest cities today must dish out considerably more money if they want to join the ranks of the home owners.
A clear outlier, Detroit is in a league of its own: although Motor City posts a staggering percentage growth (97%) compared to 5 years ago, its net home price increase over the same period is much more modest ($30,143).
But apart from Detroit’s special case, almost all other North American large urban centres have seen both startling percentage increases and overwhelming net price jumps, deepening the issue of housing affordability. In markets like Manhattan or Vancouver, which already boast stratospheric home prices, even the smallest changes impact homebuyers’ pockets in a very big way.
To see which North American cities witnessed the most spectacular price changes in the past 5 years, we looked at urban centres with a population above 500,000 and ranked them according to the change in home price. These are our key findings:
- 18 of the 83 largest North American real estate markets saw home prices jump over 50% in just 5 years. Of the 18 markets with the most explosive growth, 11 are in the US, 6 in Canada, and 1 in Mexico.
- Only 2 cities witnessed a drop in home price compared to 5 years ago, and both are located in Alberta, CA: Calgary and Edmonton.
- San Francisco boasts the highest net increase of all the cities in the study ($550,000), followed by 2 Canadian cities: Vancouver ($417,913 CAD) and Surrey ($395, 287 CAD).
Home Price Growth and Income Increases Are Not Synchronized
As a result, housing affordability is becoming increasingly problematic in many cities across North America. While the traditional rule of thumb – that a homebuyer should afford a home if its value is 3 times or less the annual household income – still holds in some markets, others are far more expensive than that.
The Staggering 5-Year Home Price Upsurge in North America’s Largest Cities
To look at one of the most extreme cases, Canadian prospective homebuyers could have bought a home in Surrey, BC for around $450,000 CAD in 2013, but they currently need almost double that: $845,500 CAD. Vancouver, BC follows suit, with a 68% increase in the past 5 years, and Brampton, Hamilton, and Mississauga, all three cities located in Ontario, are almost at a tie, with increases hovering around 66%.
In the US, Detroit stands out, with home prices that have doubled since 2013. For a city in recovery, severely affected by economic setbacks and demographic decline, increasing home prices might just be a sign of a local economy on the mend.
San Francisco saw the second highest jump, with a home price increase close to 69%. The other talent and tech hub on the West Coast, Seattle, boasts the third most significant price gain (66%), at a tie with Canadian cities Mississauga, Hamilton, and Brampton.
Mexico’s first entry in the ranking comes via Mexico City, the densely-populated megalopolis, which landed on the 18th position. Although an official source cataloging net home prices and trends for the Mexican real estate market is not available, data concerning percentage changes exists and it is telling. Home prices in the state capital went up a dizzying 50% compared to 2013. Moreover, according to El Universal, prices here have more than doubled compared to 10 years ago.
Mexico City is the only large real estate market in Mexico to undergo such a dramatic change; all the other cities included in the study experienced a more moderate home price growth, ranging between 43% in Zapopan and Durango, to 30% in Cancún.
Growing Interest in Urban Living Might Continue to Fuel Future Home Price Growth
Compared to just 5 years ago, 40 cities in the US, 31 in Mexico, and 10 in Canada have seen significant home price hikes, putting considerable strain on the average homebuyer. With more and more people opting for a connected, urban lifestyle, and with the younger generation’s desire to reduce commute time, demand for urban housing is skyrocketing.
Aside from the growing demand, large cities’ restrictive land use and zoning policies push home prices higher, making housing an increasingly challenging issue on North America’s most developed and attractive markets.
Moreover, according to an analysis by CityLab, geography may play a huge role in a city’s potential for development: cities that do not have enough space to expand once they start developing economically might suffer in the long run.
And usually it is the homebuyers who pay the price, quite literally, because the rising costs of real estate development in tightly-controlled land zones will have a major impact on final home prices, no matter their type.
Check out all the data for the 83 cities included in our study, which are ranked according to their respective home price growth:
- Point2 Homes looked at home prices in December 2013 and compared them to December 2018 numbers, in the three largest North American countries: Mexico, US, and Canada. The analysis focused on large cities, with a population over 500,000.
- The sources for the home price changes in the study are: CREA and various real estate associations (Canada), PropertyShark, NAR, Recenter (Texas, US), RBIntel (Washington DC, Baltimore, US) and other MLS’s (USA), GOB.MX (Mexico).
- In order to avoid distortions, the percentage changes were calculated using the countries’ respective currencies.
- Home prices were not adjusted for inflation. Inflation rose 8.44% in Canada from 2013 to 2018; in the US, inflation rates rose 7.58% during the same period, and in Mexico, 21.17%.
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