(NEXSTAR) — The U.S. now has a record number of cities where the “typical” home is worth $1 million or more, indicating a continued surge in housing costs, according to a new Zillow report.
In February, the nation boasted 550 “million-dollar” cities where the median home value was north of seven figures, up from 491 a year ago, the analysis shows.
California had the most cities with homes valued over $1 million, totaling 210. New York had 66, while New Jersey — which experienced the largest year-over-year increase — had 49.
Zillow noted that limited housing inventory keeps pushing home values up, and according to the National Association of Realtors, prices are expected to remain elevated this spring.
“Affordability is still a big challenge for buyers, but that hasn’t stopped prices from growing,” Anushna Prakash, an economic research data scientist at Zillow, said in a statement. “If mortgage rates drop later this year, as many expect, we may see a surge in million-dollar cities as even more buyers jump in and drive prices higher.”
While million-dollar cities were hit harder than typical U.S. cities when home values dropped in late 2022, they’ve largely mirrored the national trend over the past year, according to Zillow. Homes in these cities have appreciated in value by 4.6% year-over-year, slightly outpacing the 4.2% national average.
Not all states, however, have experienced the same growth. Florida bid farewell to three million-dollar cities — Siesta Key, Santa Rosa Beach and Sanibel — while welcoming one, the Village of Palmetto Bay. Texas lost two in the Austin metropolitan area and gained one outside of Houston, while Delaware’s Dewey Beach completely dipped below the million-dollar threshold.
Home prices aren’t the only challenge buyers are facing in this tight housing market. The average long-term U.S. mortgage rate has risen to its highest level in five weeks, a setback for prospective buyers during what’s traditionally the busiest time of the year for home sales.
Hannah Jones, Realtor.com’s senior economic research analyst, told the Associated Press that mortgage rates will likely continue to hover between that 6.6% and 7% range until inflation shows convincing progress towards the Fed’s target.
“Eager buyers and sellers are hoping to see more favorable housing conditions as the spring selling season kicks off,” Jones told the outlet. “However, mortgage rates have offered little relief as economic data, as measured by both inflation and employment, remains strong.”
The U.S. housing market has been in a slump for two years due to a sharp increase in mortgage rates and a shortage of homes for sale.
Despite this, the average rate for a 30-year mortgage is still much higher than it was two years ago, standing at 5%. This has discouraged many homeowners from selling their homes because they have fixed-rate mortgages below 3% or 4% from more than two years ago.
While many experts believe that mortgage rates will decrease somewhat later this year, most forecasts predict that the average rate for a 30-year home loan will stay above 6%.
The Associated Press contributed to this story.