America’s pandemic-era housing boom has seen prices rise 42% since the start of 2020, nearly matching the cumulative appreciation seen across the entirety of the prior decade. The increased importance of work-from-home led millions to put a hefty premium on living space, a lack of vacant inventory made supply issues more acute, and a resurgent labor market buoyed US household formation and spending power, all of which pushed up prices across the country. Home values even climbed another 1.75% over the last year, setting new records despite mortgage rates having risen to the highest levels since the turn of the millennium. Yet housing market dynamics don’t just happen uniformly across the nation—rather, they play out through thousands of interconnected local and regional housing markets, many of which have been changed drastically in the last four years.
Indeed, when you break down the national data to a neighborhood level, an interesting overall pattern emerges—America’s cheapest areas have tended to see the fastest home price appreciation since 2020, something that was pointed out by Adam Ozimek, Chief Economist at the think-tank Economic Innovation Group (keep in mind that this graph is using a log scale, so linear movements along the X axis represent exponential increases in neighborhood price). This is the “donut effect” in action—the rise in remote work has meant expensive neighborhoods in the downtown of urban cores have seen prices grow by much less than cheaper suburban neighborhoods on the outskirts of cities, producing the ring-shaped maps of home price growth and household migration from which the effect gets its name.