HomeEconomyStarter Home Prices Have Jumped 60% in the Last 5 Years Across the U.S.
Starter Home Prices Have Jumped 60% in the Last 5 Years Across the U.S.
August 18, 2019
Real estate prices have been rising in the U.S. across the board, though starter homes have seen the biggest jump in price since 2014.
According to Zillow, the price for a starter home, roughly represented as the bottom 30% of non-teardowns in price, has gone up by just over 60% in the last five years.
For those looking to purchase their first home, this has turned out to be a significant obstacle. Though this has been somewhat offset by (and some would say caused by) low interest rates and a slight loosening of lending requirements. Cumulative wage growth in the same period of time has been about 19%.
One of the biggest drivers of the jump in home prices has been a significant rise in the number of properties being purchased without a mortgage, then resold less than a year later to individuals who do require a mortgage. You might have seen this play out on one of the many house-flipping shows on TV. Adding value to a home can be a good thing for the neighborhood as a whole, as it does keep property values from falling, though it’s Millennials and those looking to buy their first home who ultimately end up paying the difference.
Another factor to look at is the relative lack of homes coming onto the market. Though a stronger economy has caused foreclosures to drop and eased on the pressure to move for job, the result for the housing market is a lower supply of houses from which first-time homebuyers can choose. Since 2014, average inventory numbers have dropped nearly 25% for houses typically considered as attainable by first-time homebuyers.
Combining the comparative lack of homes and the higher prices, first-time homebuyers are paying considerably more now for a home than they would have in 2014. Real estate prices overall have climbed about 35% in the past five years, outstripping wage growth, but boosted by a combination of lower interest rates, lack of supply and access to credit.