Owning a home was once a time-honored life milestone. Buying real estate was simply what you did as an adult in America, and for many people Homeownership was the ultimate indicator of life success and social status. But, times have changed.
Today, less people are buying houses. According to Fannie Mae, a mere 24% of Americans feel like now is a good time to buy a house. Looking back to 2013, when 54% of consumers were confident in the housing market, it feels like a lot has changed in a small amount of time. It’s clear that the certainty of prospective homeowner is waning.
The housing market is far from a perfect science, but there are some trends that could be influencing homeowner behavior and confidence such as:
- Rising house prices
- Salary stagnation
- Generational trends
- Record high interest rates
All of the above have hurt consumer housing confidence. How did we get here? Let’s unpack the above drivers to better understand the state of homeownership in 2018, and what the federal government is doing to reinvigorate the housing market.
Rising house prices
Houses are getting more expensive — period. A recent Zillow ZG, -0.04% report found that the median home value is around $1 million in 197 different cities. This year alone saw the addition of 23 more cities to this not-so-exclusive club.
This data is not reflective of metropolitan areas alone, and, in fact, this trend should concern any prospective homeowner regardless of location. According to a National Realtors Association report, the median price of a single family home is nearly $50,000 more expensive than two years ago.
Rising home prices would be a reasonable outcome of inflation, but only as long as salaries grew proportional to the housing market. And yet, herein lies a major contributor to decreasing housing confidence: salaries are not keeping pace with home prices.
According to Pew Research, “Today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.”
The rise in house prices is far outpacing salary growth, and this has serious implications on the financial mobility of American families. In the current market, 1 in 200 people will experience home foreclosure, and anyone who undertakes homeownership without a very reliable income stream runs the risk of becoming one of these statistics.
Otherwise, many Americans are simply avoiding homeownership altogether. When it comes to the newest generation of homeowners, many young people are buying in to never buying…