Homes have been booming in prices over the last few years, a lot of homeowners have been moving out of California and heading up towards Oregon, and Washington, and once the pandemic hit in 2019 people started buying land in Montana, Idaho, Utah, and other less populated states. They wanted to leave the tightly-packed cities for less-costly housing in suburban areas, and land. The historical price growth seen in the U.S. housing market is a result of several factors. Political, economic, and other societal changes have combined to result in consistent price increases. We will walk you through the history of housing prices and how they got to be so high in today’s market.
The History Of The Housing Market
The first U.S housing census was in 1940 when the average price of a single-family home was around $30,600. The average price for a single-family home in January of 2021 was 346,000. So how did we get from $30,600 to $346,000? There has been steady growth since 1940, incomes have gotten higher, and the cost of living, in general, has boomed. The most significant increase in home prices was recorded in 1970 with prices growing by 43% over the decade. This was followed by the slowest growth period over the 1980s when home prices increased by about 8%. And we also will never forget the housing crash of 2008, home prices fell by almost 12%. After the crash in 2008, it took the market two years to build itself back up. In 2017 homes were flying off the market, and everyone was buying, rates were great and continued to stay great until 2020, once the pandemic hit we saw the market fall below 30% in little over a month. Interest rates started to rise again and builders have put a stop to building more houses.
Why Are Homes So Expensive Today
There are 8 main causes why the housing market is so high right now:
- Lower Interest Rates
- Increase In Local Zoning Regulations
- Higher Construction Costs
- Changing Demographics
- Lower Builder Confidence
- Increase In Land Prices
- Governmental Subsidies
- Lower Supply
Lower Interest Rates
Lower interest rates are one of the many reasons home prices have increased over the last few years. When interest rates go down, the cost of financing a home goes down, and everyone is more inclined to purchase a home.
Increase In Local Zoning Regulations
Building and zoning regulations have come a long way since the 1940s. The changes in the law have directly resulted in home price increases. Zoning regulations are permit requirements, neighborhood restrictions, and population density laws. These zoning regulations, laws, and increase in demand have caused these homes to become more expensive.
Higher Construction Costs
Political changes, trade agreements, and construction materials being imported from outside of the United States have caused the prices of these imports to increase over time. When it comes to the housing market, these things have increased construction costs. Many materials have become more expensive.
Changing Demographics
There is a new generation of buyers: millennials. Millennials have been buying properties over the last few years, which has resulted from increased demand for houses. Millennials have been watching influencers such as Kris Krohn and learning how to invest in real estate.
Increase In Land Prices
Over the last few years, especially since the pandemic in 2020 hit, people have been buying land which has resulted in less available land throughout the country. The increase in land costs is directly related to the rise in average home prices.
Government Subsidies
As home prices have increased, the U.S. government has attempted to ease the costs. While these homeownership programs have been extremely beneficial for some, they have also contributed to increased prices. The argument is that subsidies enable homebuyers to pay more for properties, thus pushing sellers to charge more.
Lower Supply
The political and economic variables that have happened over the last few years have contributed to overpriced housing, the major effect of rising prices is that demand outnumbers supply.
Why Are Houses So Expensive Right Now?
The reason houses are so expensive right now is due to supply and demand. When the demand for housing is high, but supply is low, home prices often rise. When there is a glut of housing available in a market, homeowners may lower their prices due to less demand in the market.
Most Expensive States To Buy In
California and New York used to be the most expensive states to live in (they still are expensive) but these states are also up there in price:
- Hawaii: Real estate is soaring in Hawaii, and people are moving there or buying a second home. According to Zero down, the average sales price in 2022 is roughly $856,000.
- California: The Golden State comes to mind when thinking about expensive real estate. The average home price is over half a million.
- Oregon: has drawn more and more people over to its beautiful coastal areas, its gorgeous rivers that run through the city, and its desert down south. The median home price is $509,539.
- Washington: The PNW is a popular place to live with ocean views and stunning scenery. The median house price is $555,943.
- New York: New York has also been expensive, but in 2022 the median house price jumped to 749,000.
- Colorado: Colorado is one of the many states that saw an influx of people as a result of COVID-19. The median house price is $488,515.
Final Thoughts
Homeownership is the American dream. For many people, it’s a once-in-a-lifetime accomplishment, while others are making their living by buying and selling real estate. The steady increase in home prices has presented challenges for many individuals. Planning accordingly if it is your dream to own a home. Talking to a financial planner is the first step to take when considering buying a home. They will walk you through the dos and don’ts before you purchase.
This article is intended for informational purposes only.
This article is meant for general informational purposes and is not intended to constitute financial advice to any person. The information within should not be used for financial investment decisions or any other financial purposes, and to seek independent financial advice from an appropriate professional. The author does not give any warranty as to the accuracy of any information in the paper to any person for purposes of financial decisions.
© Weekly Real Estate News. This article may be used in marketing efforts only if full and clear credit is given to Weekly Real Estate News and a link is provided to the original article.
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