Home prices have increased significantly in many areas of the US in the last five years. But, the highest appreciating states may surprise you. California is often thought of as a highly appreciating state but did they even make the list? Alabama is often considered as a state with low home prices but how did their home prices fair the last five years? FHFA compiled a list of every state and how much the prices of their homes went up or down in the last quarter, year, 5 years, and since 1991.
Why have home prices increased so much?
You will see many reasons why people think house prices have increased recently. Many people will say investors are to blame or even boomers for not selling their homes. The media bombarded us with articles about investors buying all of the houses but the truth is investors have been selling more houses than they are buying and it is really simple why prices are increasing. The cost to build and repair has risen and there are not enough homes compared to how many people want to buy.
Towns, counties, and states are making it harder to develop land and more complicated to build houses. Whenever it becomes harder or more expensive to build or develop, it makes housing more expensive. I know it will not make many of you feel better, but the US still has the 5th most affordable housing in the world even after interest rates increased.
| Country | Price-to-income ratio | |
| 1 | United Arab Emirates | 3.0 |
| 2 | Saudi Arabia | 3.0 |
| 3 | South Africa | 3.4 |
| 4 | Oman | 3.6 |
| 5 | Puerto Rico | 4.5 |
| 6 | United States | 4.5 |
| 7 | Qatar | 5.3 |
| 8 | Palestine | 5.6 |
| 9 | Belgium | 6.5 |
| 10 | Denmark | 6.6 |
One reason why it seems like United States housing is so unaffordable is that after the last crash, housing was at the most affordable level ever. Prices were extremely cheap compared to wages. Prices were way below historical norms so when they moved back up it was a huge difference.
What states have seen the highest price increases?
It may surprise you which states had the highest appreciation in the last 5 years. A lot of people assumed California has really expensive housing so they must be one of the places with the highest price gains, but they are actually number 40! These gains are based on the percentage of increase and since California prices are already so high, their percent increase is not nearly as much as lower-priced areas.
| State | 5-year gain |
| Idaho | 97.89 |
| Florida | 81.30 |
| Tennessee | 78.18 |
| Arizona | 76.51 |
| Maine | 76.41 |
| North Carolina | 75.50 |
| Montana | 74.03 |
| Utah | 71.87 |
| South Carolina | 70.84 |
| Georgia | 69.87 |
| New Hampshire | 67.12 |
| Vermont | 63.80 |
| Rhode Island | 63.02 |
| Alabama | 61.42 |
| South Dakota | 60.67 |
| Indiana | 59.41 |
| Washington | 58.64 |
| New Mexico | 57.40 |
| Arkansas | 57.29 |
| Wisconsin | 56.85 |
| Nevada | 56.58 |
| Ohio | 56.42 |
| Missouri | 55.90 |
| Texas | 55.74 |
| Michigan | 54.04 |
| Kentucky | 53.73 |
| Hawaii | 53.28 |
| New Jersey | 52.46 |
| Oklahoma | 52.14 |
| Colorado | 52.02 |
| Nebraska | 51.94 |
| Wyoming | 51.72 |
| Virginia | 51.51 |
| Connecticut | 51.30 |
| Kansas | 50.79 |
| Massachusetts | 50.65 |
| Pennsylvania | 48.77 |
| New York | 48.27 |
| Oregon | 48.22 |
| Mississippi | 46.79 |
| Delaware | 46.14 |
| California | 45.54 |
| Minnesota | 42.71 |
| Iowa | 42.59 |
| West Virginia | 38.50 |
| Illinois | 37.22 |
| Maryland | 35.90 |
| Alaska | 35.50 |
| North Dakota | 30.97 |
| Louisiana | 28.05 |
| District of Columbia | 22.76 |
Alabama which was #1 in my list of landlord-friendly states came in with the 15th highest appreciation when many people may have assumed they would have been towards the bottom. My home state is Colorado and it feels like we have seen massive appreciation but Colorado is in the middle of the pack.
Will prices keep going up?
No one knows what will happen in the future with housing prices. There are so many variables and so many different markets with different rules and regulations. Many people thought higher interest rates would push prices down, which may have happened temporarily but they have been increasing again in 2023 in most markets. The 1970s was the highest appreciating real estate market in the last 100 years in the US and rates went from 5 to 10% in that decade. I talk about many of these factors in my monthly real estate market analysis. You can see the latest episode below.