Priced Out
Prospective homeowners are leveraging new strategies for the American Dream
American housing is expensive these days. Really expensive.
According to a recent report from Redfin, the median U.S. home sale price hit a record $383,725 during the four weeks ending April 21, up 5.2% from a year earlier—one of the biggest jumps since October 2022. Prices are buoyed by the fact that inventory remains low despite recent increases in the number of homes available for sale and persistently high-interest rates, which show no signs of coming down.
Over the past decade, including recoveries from the Great Recession and the COVID-19 recession, U.S. home values grew by more than 100%. In comparison, average hourly earnings only saw a modest 41% increase, while the Consumer Price Index rose by just 32%.
According to the National Association of Realtors, “Home prices are still rising in 85% of U.S. cities.” So, the expensive reality of the U.S. housing market isn’t going away. It’s keeping some people out of the market altogether or in the homes they already own. Others are chasing affordability, and a sizeable handful are utilizing alternative options, including a modern version of homesteading and even co-ownership.
The Biggest Increases
The highest home prices remain in bigger, coastal cities like New York, Washington, D.C., San Franciso, Seattle, and Los Angeles. However, over the past decade, the most significant home price increases have been in Western and select Southeast states where home prices and cost of living are lower.
Since 2013, Idaho and Florida have witnessed the most growth, with median home prices increasing by 165.0% and 158.5%, respectively. Other states that top the list include Nevada (+142.6%), Georgia (+141.2%), Washington (+136.9%), Utah (+135.4%), and Arizona (+134.8%).
According to Redfin, in the past year, a handful of cities, including the Midwestern cities of Pittsburgh, Milwaukee, and Toledo, saw some of the highest price increases in the U.S. Values in these cities doubled to quadrupled against the national average, signaling that increasing demand in more affordable cities across the country.
Staying Put
Over the past five years, from 2018 to 2023, U.S. Census data illustrated that the number of movers decreased from 32.4 million individuals moving in 2018 to just over 25.6 million in 2023—the lowest percentage of relocaters ever recorded. Inflation and mortgage rates are straining finances and keeping more people, including older Americans, in their homes.
The Wall Street Journal reported that Baby Boomers' intransigence is contributing to the lack of mobility. “Many empty-nesters are staying put rather than downsizing, keeping housing inventory tight. Baby Boomers bought up many of the big homes across the U.S. when they were raising their families. Now they're staying put, even though their kids are all grown up.”
According to Redfin, homeowners between 60 and 78 own about 28% of U.S. homes with at least three bedrooms, compared with 14% for millennials with children. A survey by Fannie Mae found that the majority of Americans 60 and older express no intentions to move ever again. So, there’s a mismatch between what people need and what’s available in the marketplace.
Chasing Affordability
According to a January 2024 report from Zillow, residents from major cities across the country are increasingly moving to Southern and Midwestern cities, where housing costs and competition are less severe. They’re decamping the big, expensive cities to find places they can afford. Technology and the promise of remote or hybrid work are contributing to this trend.
“Housing affordability has always mattered...and you’re seeing it across the country,” according to Orphe Divounguy, a senior economist at Zillow, in a recent interview with CNBC. “Housing affordability is reshaping migration trends.”
For example, according to a 2023 U.S. Census report, Ohio gained 26,238 new residents after losing 5,530 in 2022 and 33,065 in 2021. In addition, a study by the U.S. Department of Agriculture showed that rural areas in the Midwest and Great Plains have seen population growth after a decade of decline.
Modern Homesteading
It’s been a long time since the Homestead Act of 1862 transferred 270 million acres of public lands—or 10% of the United States's area—to private individuals. However, some local governments have reimagined this program to boost local investment and populations over the past decade.
Though free land isn’t available in most of the county anymore, individuals can still obtain some in communities located in these seven states:
Colorado
Iowa
Kansas
Minnesota
Nebraska
New York
Ohio
Other cities with excess housing or land are offering financial incentives for people to move, including forgivable loans. One of those is Baltimore, MD, which announced a yearlong $5,000 incentive for a downpayment or closing costs for city employees looking to buy a home last year. The program includes a double incentive for select neighborhoods, where home buyers can receive $10,000.
Co-ownership
With home prices still unaffordable for many buyers across the country, some are turning to co-ownership with non-romantic partners, a JW Surety Bonds study found. Close to 15% of Americans have co-purchased a home with a family member or friend rather than their spouse or partners—and another 48% would consider it. Co-ownership allows buyers to combine their income and debts to improve their chances of getting a larger loan.
In what’s been dubbed “houses before spouses,” this trend is particularly notable among Millenials and Gen Z, who are delaying marriage and eager for their slice of the American Dream. According to Pacaso, six of the 10 counties with the highest co-ownership were in Virginia, and the rest were in Utah, North Dakota, Minnesota, and Colorado.
Market Transition
Some economists believe that while the widespread aging of Baby Boomers may relieve some of the pressure on the housing market in the coming years, it is unlikely to substantially reduce prices. This is because aging occurs predictably, and the market can adapt to any increase in available homes over an extended period. For instance, Freddie Mac forecasts a gradual decline in baby boomer households, from 32 million in 2022 to 23 million by 2035, illustrating a slow and steady decrease rather than a sudden drop.
In the meantime, as inflation continues to rise and interest rates remain stubbornly high, the price of homes and the costs of borrowing money will increase, putting the dream of homeownership out of reach for more people. Innovative, affordable housing solutions are few and far between, so future homeowners will need to be creative with their options.
Have you or someone you know moved for more affordable housing, participated in a homesteading program, or purchased a home with a non-romantic partner? If so, we’d love to hear from you for future reporting.