A recent study has revealed a stark contrast in the trajectory of inflation and home prices over the past six decades. According to the findings, while inflation has surged tenfold since 1963, home prices have skyrocketed by a staggering factor of 24.
Had home prices followed the same inflationary trend over this period, the median price for a typical house in the United States would stand at $177,511 today. This conclusion stems from a fresh research report conducted by Clever, a reputable real estate data company.
Contrary to this hypothetical scenario, the current reality paints a much pricier picture. The median price tag attached to a home in the U.S. now hovers around the half-million-dollar mark, specifically $412,778, as per recent data unveiled by Redfin.
Commenting on these findings, Matt Brannon, a data writer at Clever and the report’s author, lamented, “Today, it’s harder for adults to buy homes than it was for their parents’ generation.”
Home prices surge beyond inflation rates.
The surge in home prices outstripping inflation can be attributed not only to mortgage rates but also to the dynamics of supply and demand within the U.S. housing market, according to Brannon.
“While the demand for other consumer goods can be met relatively swiftly by scaling up production, the same cannot be said for housing,” Brannon explained. “Constructing homes typically takes several months.”
Data from the 2022 Survey of Construction conducted by the U.S. Census Bureau indicates that the average time required to complete a newly built single-family home stands at approximately 9.6 months.
Moreover, Brannon highlighted that zoning restrictions and exorbitant land costs further compound the challenge of initiating new home construction projects.
Addressing the need to bolster housing supply, C. Kirabo Jackson, an economist and member of the White House Council of Economic Advisers, emphasized the necessity for local policymakers to streamline regulations governing land use and zoning. These regulations dictate crucial factors such as building height limitations and lot sizes.
“Housing production operates on a slower timeline compared to other industries,” Brannon underscored. “As a result, inadequate supply to meet escalating demand often triggers price hikes.”
Efforts are underway to make homes affordable.
Efforts are underway to tackle the pressing issue of home affordability in the United States, a concern that resonates deeply with voters across the political spectrum.
According to a survey commissioned by Redfin, over half (53.2%) of U.S. homeowners and renters indicate that housing affordability will influence their voting decisions in the upcoming presidential election. The survey, conducted by Qualtrics in February, polled 3,000 individuals.
The impact of current housing affordability extends beyond voting sentiments, as revealed by Redfin’s findings: 64.2% of owners and renters express negative sentiments about the economy due to housing affordability challenges.
Interestingly, affordable housing ranks as a top priority for both liberal and conservative voters. While it holds the top spot among liberal voters, it occupies the third position for conservative voters, according to a separate survey conducted by the Real Estate Witch.
Matt Brannon noted, “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.”
Addressing this critical issue, President Biden unveiled a plan in early March as part of his fiscal 2025 budget to reduce housing costs, enhance supply, and broaden access to affordable housing.
The proposed measures include the introduction of a mortgage relief credit, offering a $10,000 tax credit for first-time homebuyers and a similar credit of up to $10,000 for families selling their starter homes.
Brannon welcomed these initiatives, stating, “It’s encouraging that the administration is looking at a range of options to expand housing supply. Interventions like these are absolutely required if the U.S. wants to avoid an even worse reality regarding a lack of home affordability.”
Additionally, in a separate move, the White House, along with the Federal Housing Administration and Ginnie Mae, announced enhancements to the Title I manufactured housing lending program.
This includes an increase in loan limits and expanded lender requirements, aiming to facilitate access to affordable financing for manufactured homes.
Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania, remarked, “Manufactured homes, in this time of historical lack of affordability, are a real option for many households. This change enables access to affordable financing for manufactured homes.”
