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Why Are Houses So Expensive? - by Zachary Boyce

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    • Zachary Boyce at Pima Community College
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    We all have seen the crazy price tags on houses that only seem to be getting bigger and bigger and for those of us that don’t already own property, it can be scary. With a house being one of the biggest purchases of someone's life, it’s getting to a point where most people can’t make that purchase at all even with a stable career. In this article I will talk about how the housing market got to this point, what future predictions can tell us and how it will affect your future.

    The Cost of Housing Today VS. Yesterday 

    Way back in 1970 a regular family could get an average sized house for about 30,000 US dollars ("Average Sales"). At the same time average salaries in the US were roughly 10,000 US dollars ("US Average"), so at this time a house for your family would cost roughly 3 years of your annual income. Today in 2022, it would cost the average person almost 8 years of their annual income which is almost triple what it would have taken 50 years ago. Other than a housing market crash in 2007 that went through to 2012, the incline on the pricing of houses has been steep, especially in 2020 where in just 2 years the average cost of a house in the US went up $150,000 ("Average Sales"). Between those dates in 1995, the average cost of housing was at $158,000 while average income was at $34,000 making it take 4 and a half years of your annual income to pay off a house, almost half of what it would take today.

    housing.jpg

    FRED, 26 July 2022 https://fred.stlouisfed.org/series/ASPUS#

    How Did it Get This Far? 

    I am first going to explain the big jump we had in 2020 that continues to get higher and higher. Back at the start of the COVID-19 pandemic, interest rates were reduced to boost economic health and help those struggling during the hard times. Because of this a lot of people left their apartments and rentals and bought property causing demand to shoot up while supply went down. While this was happening, political decisions changed trade agreements and import costs making the cost for supplies needed to build new homes increase. These combined with some other minor influences has caused the prices to skyrocket (Team).

    Since the 1940’s housing prices have always steadily increased with bumps here and there but the problem is that annual income for the average American has not reflected the increase in housing. While housing increased at random annual intervals ranging from 8% upwards of 40% and sometimes even decreasing ("Average Sales"), the average household income only went up 2% to 3% ("US Average"). The government has tried to subsidize costs of housing but ultimately it has only ended with housing costing more through supply and demand.

    What Should We Expect? 

    I am going to start by saying, don’t get your hopes up. Although some housing experts think that a crash or decline is on the way, a lot more experts think the opposite. The problem that we are facing is with supply and demand. Millennials have hiked up the demand for housing to the point that it’s at and it is expected that Gen Z will do the same afterwards. In February the construction of new homes was at a rate of 6.8% which was the highest since 2006 but it still can’t keep up with demand as demand doesn't stop while supply is wavering (Campisi).

    Suggestions 

    I would tell you to move to a less expensive state but if everyone did that then it would become just as expensive as the others. The only thing I can say for certain is that you should start saving as soon as you can because you never know what it will look like when the time comes for you to buy your own house. With the outlook on the future of the housing market, the best time to buy would be as soon as you can. With the way things look, in 5 years housing could cost millions while we are still getting paid the same. Another thing to think about is that if you are planning on buying a “forever home” then the worry of the housing market crashing should be gone as you wouldn’t sell whether it goes up or down. When the time comes for you to buy a house of your own there are many companies that are willing to assist you with the financing, some even going as far as giving you free money towards your home. If you search for the keywords, “home buying assistance” or “financial aid”, you will get tons of results of offers for grants, help with your down payment, or even if you just need a little more time to make some payments. There are so many options available and I personally have never bought a home so I am not in a position to recommend any particular one but do your research and find what is best for you. Everyone wants their dream home, but in the end it comes down to how hard you work for it.

    Works Cited 

    “Average Sales Price of Houses Sold for the United States.” FRED, 26 July 2022, https://fred.stlouisfed.org/series/ASPUS#.

    Campisi, Natalie. “Will the Housing Market Crash? Experts Give 5-Year Predictions.” Forbes, Forbes Magazine, 22 Sept. 2022, https://www.forbes.com/advisor/mortg...-market-crash/.

    Team, ROS. “Why Are Houses So Expensive in 2022” NY Rent Own Sell, 8 Sep. 2022, https://www.nyrentownsell.com/blog/w...-so-expensive/.

    “US Average Household Income by Year” Multpl, Feb 2021 https://www.multpl.com/us-average-in.../table/by-year.

    This page titled Why Are Houses So Expensive? - by Zachary Boyce is shared under a CC BY-NC-ND 4.0 license and was authored, remixed, and/or curated by Zachary Boyce at Pima Community College.