Home prices in the US have outpaced the rate of inflation significantly since the 1960s, according to a study by Clever Real Estate. The study reveals that housing prices have risen at 2.4 times the pace of inflation over the decades. If home prices had kept up with inflation, the median home would cost $177,500 today, a stark contrast to the actual median price of $431,000.
This trend persists even when looking at more recent data. Since 2013, inflation has increased by 31%, while the median home price has surged by 63%. The report highlights that homeownership has always been expensive, but the current costs are unprecedented.
Comparing homebuying prospects between baby boomers and millennials, the study shows that homes are nearly twice as expensive for millennials when adjusted for income, compared to what boomers paid in their 30s. This means that Americans are allocating a larger portion of their income towards purchasing a home.
In the 1980s, it took around 3.5 years' worth of household income to buy a typical home. However, this figure has now risen to 6.3 years' worth of household income. A Zillow survey further indicates that homeowners today need to earn 80% more to comfortably afford a home compared to just four years ago.
The surge in home prices has been fueled by a significant supply shortage, with 3.2 million fewer homes available. Much of the new construction is focused on larger, more expensive single-family homes, with limited affordable options. Additionally, a substantial portion of new construction caters to the rental market.
If the current pricing trend continues, projections suggest that by 2050, the median home price will be 8.4 times the median household income, indicating a further strain on affordability in the housing market.
