A new analysis by the Bank of America Institute (BOA) has been released to investigate the surge in housing costs throughout the United States. According to the research conducted internally, the study found that the median rent payment increased by 8% YoY in February 2023, while mortgages increased at a rate of 7% YoY.
The analysis breaks down this data by region and city, revealing variations of this data by geography. Tampa and Phoenix, two Sun Belt cities, experienced the highest rent increases, with growth rates of 26% and 23%, respectively. In contrast, San Francisco had a low YoY growth rate of 2.5%.
The Institute’s economists provide four plausible explanations for the regional variations. Firstly, people’s migration trends between states during the pandemic saw a shift from California and Illinois to Arizona, Florida, and Texas. Secondly, the Sun Belt markets still offer more reasonably priced housing options, even with the rise in home prices and rents. Thirdly, the Sun Belt markets have been creating more jobs than other regions, surpassing the national average since the pandemic began. Lastly, the surge in high-paying jobs, such as those in technology and finance, in the Sun Belt region has led to an increase in local housing demand and prices.
Anna Zhou, the Economist for Bank of America Institute, explained that although housing costs are increasing across the United States, the impact is not uniform across all regions. Zhou believes that a region’s population and employment growth are the primary factors driving its housing market. This could explain why many Sun Belt cities are experiencing a YoY increase in rents of over 20%.
The analysis drew on exclusive data covering 67 million accounts, which amounted to $4.2 trillion in payments and $1.4 trillion in consumer wealth management deposits in 2022. The study shows that the housing market continues to be a major concern for Americans, with significant variations by region and city. The BOA Institute’s analysis sheds light on the factors driving these regional differences and highlights the need for policymakers and market participants to pay attention to the dynamics of the housing market across the country.