The Inside Outside Guys: Why homes are expensive and hard to find
Home ownership is out of the reach of many with high costs and high interest rates.
Atherton, California, is the most expensive housing market in the United States, with a median home listing price of nearly $8 million
While more than 65% of American households own their homes, the disparity in pricing can be extreme when we compare the market in Atherton to that of West Virginia, where the median home price hovers around $140,000.
In fact, West Virginia has the highest rate of homeownership of any state in the U.S at nearly 75%, while California comes in around 55%.
Homeownership in this country has been a key component of wealth accumulation for more than 100 years and over a quarter of such properties are valued above a half-million dollars, representing a significant portion of owner equity.
Many countries throughout the world share the belief that owning your home is a good thing. This is supported by the reality that countries like Laos and Romania at more than 95% have some of the highest ownership rates.
Michigan is a national leader, both in terms of tenure and ownership, with rates hovering above 70% and occupants staying in their dwellings for decades.
The median price of a home in Michigan is around $250,000 dollars, up nearly 4% percent from last year. Your money will buy you more square footage in some states than in others.
While the median square footage of a home in the United States is around 1,800, in Michigan, it is over 2,000 square feet.
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New construction homes tend to be larger than average, more than 2,500 square feet, but there are many smaller existing homes.
As of 2023, the United States had nearly 150 million homes with over 130 million of those occupied. The National Association of Home Builders told us several years ago we were headed for a housing shortage based on population growth trends and the aging inventory of our housing stock.
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It has been estimated that we currently have a shortfall of nearly 6 million available homes nationally, with California leading the shortfall at approximately 2 million homes and New York at nearly 1 million homes. Those numbers don’t say it all, though, because affordability becomes a key issue. Can buyers without homes afford to purchase in those states?
As an example, Fort Lauderdale, Florida, is said to be overbuilt, with a median home price of over $500,000, and 85% of homes sold in that market going for less than what they were listed for.
So, part of the answer lies in constructing homes in demand areas that are affordable for the demographic wishing to purchase.
On the cusp of the COVID pandemic, we saw a large segment of the workforce discover they could work out of their home while at the same time rising interest rates kept many otherwise mobile buyers from walking away from favorable 30-year fixed rates and risking higher rates in a new home.
We have also seen a slight trend reversal in older U.S. adults. While there were a couple of decades where it was assumed retirees would flock to warmer Southern climes to live out their golden years, many soon discovered they were not simply relocating, but also leaving behind familiar life anchors like physicians, places of worship, the coffee-clutch venue down the street, and related family.
These dynamics have contributed to more people staying put and even furthering the investment in their homes to better accommodate them safely aging in place.
Owners discovered it often made more financial sense to improve their existing home than it did to relocate.
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While the rate of home ownership in the United States has held fairly steady near the mid to high 60% range, we are witnessing an age disparity. Nearly 80% of people over the age of 65 own homes, but that number drops to under 40%for those young adults under 35.
It is believed that lower fixed-rate mortgage money will help to elevate that statistic, but most markets need an influx of more available homes, as well.
In previous articles we have discussed the reality that affordability is not a one-size-fits-all issue. Land availability, location and pricing conspire with high development costs and the high cost of money to limit housing mobility for millennials wishing to become owners.
We need to work together with great professionals to maintain our current housing stock and create more homes for those wishing to buy.
