It’s no secret that a gallon of milk costs more today than it did just a few years ago or that you’re paying more at the pump today than you were even yesterday. But although prices for every good and service have continuously risen over the last 50 years, home-price hikes have taken the lead—increasing 1,608% since 1970, a new report points out.
“Home Prices vs. Inflation: Why Millennials Can’t Afford Homes,” a new report from Clever Real Estate, takes a look at how today’s economic shifts including rising inflation are impacting Americans’ homebuying decisions. The company analyzed publicly available data from the Federal Reserve Bank of St. Louis, the Zillow Home Value Index, and the U.S. Bureau of Labor Statistics.
Throughout 2021, the inflation rate jumped 7.5%—nearly 4x the Federal Reserve’s target inflation rate of 2%, the report notes. As we approach the second quarter of 2022, home prices are still high as banks begin to raise mortgage rates to pre-pandemic highs. Meanwhile, price hikes are offsetting wage raises across the nation, rendering increases to annual income far less effective against the rising tide of inflation.
“If home prices grew at the same rate as inflation since 1970, the median home price today would be just $177,788—rather than $408,100,” the report points out. It goes on to explore how affordability has impacted homeownership, making it harder for millennial buyers to enter the market.
Key findings:
- Home prices have increased 1,608% since 1970, while inflation has increased %644
- Last year alone home prices rose 20%, while inflation grew at a 7.5% pace.
- Rises in annual income are barley keeping pace with inflation over the last few decades.
- Overall prices of goods in America have risen 67% since 2000.
- After adjusting for inflation, the median American household income has increased by just 7% since 2000—just 0.3% per year.
- Across the U.S., average home prices have increased 156%
- The five U.S. cities with the lowest home-price inflation since 2000 are:
- Cleveland (60%)
- Detroit (62%)
- Memphis (72.7%)
- Chicago (73%)
- Hartford (87.8%)
- The five U.S. cities with the highest home-price inflation since 2000 are:
- San Francisco (290%)
- Seattle (235%)
- Tampa (223%)
- Miami (220)
- Austin (209)
The takeaway:
“An inflationary environment, where building materials or other equipment become more expensive, can account for some increases in housing prices,” read the report. “But home values can be affected by a network of different events and circumstances, including population migration and working conditions.” The report cites demand, inflation, limited inventory and low cost of debt as the main influences behind the current trend that has increased house prices faster than inflation.
“Home prices are expected to continue staggering growth—with Zillow forecasting year-over-year growth reaching 22% this spring,” The report continues, “Fannie Mae predicts that high mortgage rates and steep housing prices will temper home appreciation into 2023. So although many buyers are priced out of the 2022 market, they may be able to circle back in 2023.”
Read the full report at https://anytimeestimate.com/research/housing-prices-vs-inflation/.
