ST. LOUIS–Just how much more expensive home ownership is for the current generation vs. those who preceded them can be seen in a new analysis from Clever Real Estate.
As the analysis points out, inflation jumped 7.5% during 2021 alone.
“When most Baby Boomers turned 30 around 1985, the average single-family home cost $82,800,” Clever Real Estate said in releasing its findings. “But today, Millennials' dollars don't stretch nearly as far. The sense that homeownership is no longer within reach isn't imagined, as the average Millennial who turned 30 in 2019 would have spent $313,000 on a typical home — a cost that far outpaces inflation since 1985, when the average Baby Boomer turned 30.”
Data Analyzed
To determine just how these economic shifts are impacting Americans, Clever said it analyzed publicly available data from the Federal Reserve Bank of St. Louis, the Zillow Home Value Index, and the U.S. Bureau of Labor Statistics, finding that home prices have rapidly increased over the last five decades, eclipsing the inflation rate by 150% since 1970.
“In fact, if home prices grew at the same rate as inflation since 1970, the median home price today would be just $177,788 – rather than $408,100,” Clever said.
It further noted the median American household's income has just slightly kept ahead of inflation over the last 40 years, leaving many wondering what will happen this year as the inflation rate continues to climb rapidly.
What the Data Show
Among the data points in the analysis:
- Home price increases are significantly outpacing inflation rates, having increased 1,608% since 1970, while inflation has increased 644%. In 2021 alone, home prices rose 20%, while inflation grew at a 7.5% pace.
- If home prices grew at the same rate as inflation since 1970, the median home price today would be just $177,788. Instead, home prices have increased far faster than inflation, soaring to $408,100.
- Overall, the prices of goods in America have risen 67% since 2000. After adjusting for inflation, however, the median American household income has increased by just 7% in total since 2000 – that’s only 0.3% per year, the company said.
- Compared to the average Baby Boomer entering their 30s in 1985, the average Millennial entering their 30s in 2019 faced a 31% higher home-price-to-income ratio.
- Housing prices have increased 393% since 1985 — while the average baby boomer in their 30s paid $82,800 for a home, millennials in their 30s paid $313,000 in 2019.
- After adjusting for inflation, the median American household income has increased by just 17% in total since 1990. That’s only 0.5% per year.
The Most Inexpensive/Expensive Markets
Home prices have risen the least in Cleveland since 2000, where they've jumped just 60% compared to the national average of 156%.
Other cities with low home-price inflation include:
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- Detroit (62%)
- Memphis, Tenn. (72.7%)
- Chicago (73%)
- Hartford, Conn. (87.8%)
- Cincinnati (88%)
- Birmingham, Ala. (90%)
- St. Louis (98%)
Meanwhile, home prices have, unsurprisingly, seen the biggest increases in California — 277% since 2000, stated Clever. Many West Coast cities such as San Francisco have seen prices increase as much as 290% since 2000.
Other cities with high home-price inflation include:
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- Seattle (235%)
- Tampa, Fla. (223%)
- Miami (220%)
- Austin, Texas (209%)
- Portland, Ore. (207%)
- Phoenix (206%)
- Denver (204%)
The full report can be found here.
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