First-time buyers faced with rocketing house prices are paying more to get less, new figures reveal.
The price of the average home has jumped more than a third to $442,500 in the last five years. But the average size of those being sold has shrunk since 2019, as fewer large homes have come to market.
It means that buyers now need to pay 52.7 percent more than they would have in May 2019 for the same sized home, with a surge in working from home partly to blame.
‘The price-per-square-foot metric is an important one to pay attention to,’ says Realtor.com senior economist Ralph McLaughlin.
‘The change in that metric is a more solid measure of how much more a home is worth over time than looking at changes in median list price.’
New Yorkers now have to pay 84 percent more than they would have five years ago for the same-sized home with the city topping the list of price per square foot increases
The trend can be seen nationwide but the worst affected cities are Nashville, Tennessee, where the metric has jumped 68.6 percent, Boston, Massachusetts, where it is up 72.9 percent, and New York City where it has increased by an eye-watering 84.7 percent.
‘As remote and hybrid work arrangements became more common, buyers flocked to areas that offered bang for their buck within a reasonable commute,’ said Realtor’s Hannah Jones.
Boston is set to be the next city where buyers will need $1 million for an average family home after the the typical price hit $950,000 last month.
But the top ten increases in price per square foot is dominated by cities in the south with Tampa in Florida, Austin, Texas, and Phoenix, Arizona all making the list.
‘Buyers from high-priced areas flocked to affordable Sun Belt metros,’ Jones said.
‘Incoming demand led to low inventory and climbing prices. Though inventory levels have recovered significantly in the area, home prices have not softened.’
But most of the list is dominated by cities in the south with Nashville, Tennessee seeing a 68.6 percent jump in the price per square foot metric
A perfect storm of spiraling construction costs, desperate buyers, and existing owners sitting tight in their homes has seen house prices double in 68 of America’s 100 largest cities in less than ten years.
That is despite the average rate on a 30-year fixed-rate mortgage hitting seven percent – a 23-year-high – as policymakers attempt to squeeze inflation out of the economy.
The fastest increase has happened in Detroit where the average home took just 4.9 years to double in value.
But there are bargains to be had in the Motor City where the price per square foot has increased by a modest 23.2 percent since May 2019.
Baltimore in Maryland and San Jose in California also underperformed in the national landgrab with increases of 24.8 percent, and 26.3 percent respectively.
Realtor.com senior economist Ralph McLaughlin warned buyers to pay attention to the little regarded metric while his colleague Hannah Jones blamed the boom in home offices for the surge in prices
Boston, Massachusetts, tucks in behind NYC on the list, recording a 72.9 percent increase
Jared Wilk of the Greater Boston Association of Realtors warned that a decade of ultra-low interest rates has left existing homeowners unwilling to move house and take on new mortgages at the much higher rates.
And that has left buyers desperately competing for the few homes that do come to market, with more than a third of houses being paid for in cash.
‘The reality is that if rates go up or down, if more homes come on the market or fewer, prices are going to go up,’ Wilk told the Boston Globe .
‘There is a lot of pent-up demand, and a supply imbalance that is going to keep pushing them up.’
Realtor counted 788,000 homes on the market in May, compared with nearly 1.2million in May 2019.
‘We expect a still-sizable gap between 2024 housing inventory and the pre-pandemic housing market to persist as it closes only gradually,’ it wrote in its monthly survey of the housing market.
‘The growth in homes particularly priced in the $200,000 to $350,000 range outpaced all other price categories.
Pictured: $1 million is now needed to buy this average single family home in East Boston
Tampa in Florida is just a beat behind with a 68 percent increase
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‘This increase is again primarily fueled by a greater availability of smaller and more affordable homes in the South.‘
But forecasters at financial analytics company CoreLogic expect to see prices fall in areas of the south over the next year.
Florida’s Palm Bay-Melbourne-Titusville, and Deltona-Daytona Beach-Ormond Beach regions are likely to see price drops, along with Georgia’s Atlanta-Sandy Springs-Roswell region.
‘While the housing market is still in the seller’s territory, it is expected to shift in a buyer-friendly direction as mortgage rates resume their decline over the next year and the number of homes for sale increases,’ Realtor wrote.