How American Home Prices Are Outpacing Inflation
If it seems home purchases have become unattainable for many Americans, you’re not alone in your thinking—and you’re not wrong. According to a recent analysis by Clever Real Estate, home prices have been outpacing inflation for quite a while, and the rate of home price increases has been double the rate of inflation for the past ten years. The Data Summarized In a recent article compiling data and insights from sources including Zillow, Freddie Mac, the Federal Reserve, the Bureau of Labor Statistics, and the U.S. Census, Clever Real Estate examined home price trends and inflation impacts over time. The results showed the rate of inflation rose 31% since 2013, while home prices rose a whopping 63% in the same time period. That means in ten years, the average home price climbed from $264,800 to $431,000. That’s a huge increase in less than a generation. While this is striking growth, we all know peaks and valleys in the economy, and the real estate market, are nothing new. Plus, we’ve had some extraordinary circumstances with the pandemic during that time period. However, even if we take
a broader scope, the results are much the same. For example, let’s go back sixty years. The average rate of inflation has risen 10% since 1963, while home prices are 24 times more expensive. Clever’s report puts it into perspective, saying, “$20,000 worth of assorted goods in 1963 would cost $200,000 today—but a $20,000 house in 1963 would cost $480,000 today.” It’s no wonder today’s home buyers are feeling like ownership is out of their grasp. In a recent survey, 73% of the 1,000 Americans who participated told Clever they felt home prices were “unattainably high.” But the price of houses is only one part of the equation. We also have the issue of whether wages are keeping up with inflation and home prices. The answer is no. In 1985, a home cost the equivalent of 3.5 years of median household income. In contrast, today’s generation needs to cough up about 6.3 years of medium income to afford a home. The study put this into context, reporting,
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