Home prices rose 2.4 times faster than inflation since 1960s, study finds. What that means for homebuyers

KEY POINTS

• If home prices increased at the same rate as inflation since 1963, the median price of a typical house in the U.S. would be $177,511, according to a new research report by Clever, a real estate data company.
• In reality, the cost of a typical house in the U.S. is nearly half a million dollars.
• The median price for a home in the U.S. is $412,778, according to Redfin data.

While inflation is 10 times higher now than 60 years ago, home prices are 24 times more expensive, a new study found.

If home prices increased at the same rate as inflation since 1963, the median price of a typical house in the U.S. would be $177,511, according to a new research report by Clever, a real estate data company.

In reality, the cost of a typical house in the U.S. is closer to half a million dollars. The median price for a home in the U.S. is $412,778, according to new Redfin data.

“Today, it’s harder for adults to buy homes than it was for their parents’ generation,” said Matt Brannon, a data writer at Clever and the author of the report.

More from Personal Finance:
When sellers should list their home in 2024 to earn a premium
How to use rent reporting services to improve credit
Here are the ‘Barbie’ jobs that most real-life women hold

Why home price growth has outpaced inflation

While mortgage rates have contributed to high costs, supply and demand have also affected the price growth of homes in the U.S., Brannon said.

“When demand for other consumer products comes up, or when it increases, it’s usually not too hard for people to scale up supply,” Brannon said. “Whereas houses take months to build at a time.”

The average time to complete a newly built single-family home is about 9.6 months, according to the 2022 Survey of Construction conducted by the U.S. Census Bureau.

Zoning restrictions, along with prohibitive land costs, can also make it hard to even secure the opportunity to build a new home, Brannon said.

To increase housing supply, local policymakers would need to lower the barriers for builders by easing land-use and zoning regulations, which determine factors such as the maximum height of a building or the minimum size of a lot, C. Kirabo Jackson, an economist and member of the White House Council of Economic Advisers, previously told CNBC.

“Production can’t move as quickly in housing as it does in other industries,” Brannon said. “That often means the price goes up when there isn’t enough supply to meet demand.”

Proposals in play to ease home affordability

The affordability crisis for homes in the U.S. is a primary political issue for many Americans. More than half, 53.2%, of U.S. homeowners and renters say housing affordability is affecting their decision on who they plan to vote for in the upcoming presidential election, according to a Redfin-commissioned survey. Qualtrics conducted the research in February by polling 3,000 U.S. homeowners and renters.

Moreover, current housing affordability makes 64.2% of owners and renters have negative feelings about the economy, Redfin found.

In fact, affordable housing is a pressing topic for both liberal and conservative voters. The topic is ranked as No. 1 for liberals while it’s No. 3 for conservatives, according to a separate survey by the Real Estate Witch.

“It’s just something that doesn’t come up as often in polling … but when you do ask, it really resonates with people that think about how expensive housing is today,” Brannon said.

To address the issue, President Biden announced in early March as part of his budget for fiscal 2025 a plan to cut housing costs, boost supply and expand access to affordable housing.

Biden also called on Congress to pass a mortgage relief credit that would provide a $10,000 tax credit for first-time homebuyers and a similar tax credit of up to $10,000 to families selling their starter home.

“It’s encouraging that the administration is looking at a range of options to expand housing supply,” said Brannon in a statement. “Interventions like these are absolutely required if the U.S. wants to avoid an even worse reality regarding a lack of home affordability.”

In a separate action last month, the White House, the Federal Housing Administration and Ginnie Mae, the government-owned guarantor of federally insured home loans, announced an increase on loan limits and broadened lender requirements for the Title I manufactured housing lending program.

“Manufactured homes in this time of historical lack of affordability are a real option for many households,” said Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania. “This change enables access to affordable financing for manufactured homes.”

Source: CNBC