US Cities With The Fastest Growing Home Prices

The housing market in the United States has been getting increasingly expensive since the COVID-19 pandemic in 2020, and the past year was no exception. This trend is partially due to tariffs proposed by President Donald Trump, which were projected to heavily affect the housing market leading into 2025. The increased housing prices across the country have particularly impacted the costs of homes in both smaller and medium-sized cities.

Surprisingly, the city that saw the highest growth in its housing prices was Birmingham, AL, with an astonishing 38.6% increase compared to 2024, according to Redfin. That being said, the price of homes in Birmingham remains relatively low compared to other areas in the U.S. Many cities nationwide also saw growth during the previous year, but not nearly to the degree Birmingham did. Larger cities like Washington, D.C., and Saint Louis, Missouri both saw increases of over 10%, while smaller places like Rockford, Illinois, and Alexandria, Virginia, saw slightly more growth than that. The growth in the housing market can be confusing, as multiple factors influence housing prices. But there are several forces in particular that have affected the cities with the highest margins in the past year.

There are two major trends that are similar across cities experiencing rapid housing price growth: Mortgage rates have increased and the number of new homes being built has dropped off.

Mortgage rates in the United States have increased steadily over the past several years, and now sit at an average of over 6%. This number is significantly higher than pre-pandemic rates, and while the Fed might enforce more rate cuts by 2026, right now there is little incentive for homeowners who purchased their home before 2020 to sell or upsize. Additionally, cities like Washington, D.C., that have relatively young populations compared to the national average, can experience an additional shortage of housing as homeowners choose to stay in single-family homes. This particularly affects first-time home owners in cities with relatively high populations under the poverty line. This is the case in Birmingham, where over 25% of the population is under the poverty line, according to Data USA's analysis of census data.

The number of new homes being built is also an important factor. Relatively rapid population growth can outpace the supply of new homes, leading to a market where the price of a home increases due to the limited number available. Ultimately, the cost of homes across the United States is increasing, particularly in mid-sized cities, so making a down payment on a house might not be the wisest investment right now.