One mind-blowing chart shows the death of the American starter home over the last 2 decades
Smith Collection/Gado/Getty Images
- In 2002, more than half of new homes sold for under $200,000.
- In July 2021, less than 2% did, while nearly half sold for over $400,000.
- Homeownership has become increasingly unaffordable for the American middle class, and it's getting worse.
- See more stories on Insider's business page.
The dream of homeownership has been slipping through the fingers of Americans for decades. The death of the affordable starter home only makes this part of the American Dream more unattainable.
A generation ago, the norm was new houses being sold for under $200,000. Now, houses that cheap have all but vanished from the market.
Oxford Economics' chief US economist, Gregory Daco, highlighted a chart created by economics blogger Bill McBride showing the distribution of new homes by price range going back to 2002.
That chart, using data from the Census bureau's monthly report on new home sales and prices in the US released on Tuesday, shows that while over half of new homes sold in 2002 were priced at under $200,000, only about 2% fell in that range in July 2021. Meanwhile, the share of new homes selling for over $400,000 has steadily risen, with nearly half falling in that bracket last month:
It's worth noting that the above figures are not adjusted for inflation. Going by the Bureau of Labor Statistics' CPI inflation calculator, $200,000 in January 2002 would be worth about $308,000 in July 2021. Still, the average price of a new home in the US has roughly doubled over that period, well outstripping general inflation.
The skew between relatively inexpensive houses and highly priced homes has gotten even worse over the last year amid a wild pandemic-fueled housing market. In February 2020, the month before COVID-19 began spreading widely in the US, 11% of new homes sold for under $200,000, while about a third were over $400,000.
That same month, Insider's Hillary Hoffower reported that housing experts were crying out for more starter homes, as the record-low mortgage rates made housing theoretically more affordable than ever before, but housing prices consistently outpaced wage growth in metro areas.
In the 18 months since, the US has shown signs of a nascent housing bubble. Nationally, prices have been spiking higher, and homes are selling more quickly than they have in years, suggesting a slew of buyers snapping up houses almost as soon as they're listed.
This month, one California homeseller described the current market to Insider's Ben Winck as being "like a game show" in its chaotic, frenzied speed.
Even renters are facing a price crunch, with rents spiking faster than they have in 16 years, according to real estate data firm CoreLogic.
It's no secret that Americans have long faced a housing affordability crisis that has only gotten worse in the last year. But as the chart shows above, it's almost impossible to find a relatively cheap home to buy, and many would-be first-time homebuyers will likely struggle to find that starter home of their dreams.
from Business Insider https://ift.tt/3DkhFdC
No comments