Price per square foot of average American home skyrockets more than 50 PER CENT in just five years – as experts reveal why
New figures reveal that first-time buyers facing rising house prices are paying more to get less.
The price of an average home has risen by more than a third in the past five years to $442,500. But the average size of homes sold has shrunk since 2019, because fewer large homes are coming onto the market.
It means buyers now have to pay 52.7 percent more than in May 2019 for a home of the same size, with the increase in working from home partly to blame.
“Price per square foot is an important metric 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 the average list price.”
New Yorkers now have to pay 84 percent more than they did five years ago for a home of the same size, with the city topping the list in price increases per square foot
The trend can be seen nationwide, but the hardest-hit cities are Nashville, Tennessee, where the statistic increased by 68.6 percent, Boston, Massachusetts, where it increased by 72.9 percent, and New York City, where it increased by an eye-popping 84.7 percent increase. .
“As remote and hybrid working became more common, buyers flocked to areas that offered value for money within a reasonable travel distance,” says agent Hannah Jones.
Boston will be the next city where buyers need $1 million for the average family home, after the average price hit $950,000 last month.
But the top ten price increases per square foot are dominated by southern cities, with Tampa, Florida, Austin, Texas and Phoenix, Arizona all making the list.
“Buyers from expensive areas flocked to affordable Sun Belt metros,” Jones said.
‘The incoming demand led to low inventories and rising prices. While inventory levels in the area have recovered significantly, house prices have not fallen.”
A perfect storm of rising construction costs, desperate buyers and existing owners locked in their homes has caused home prices in 68 of America’s 100 largest cities to double in less than a decade.
That’s despite the fact that the average interest rate on a 30-year fixed-rate mortgage is seven percent — a 23-year high — as policymakers try to squeeze inflation out of the economy.
Realtor.com senior economist Ralph McLaughlin warned buyers to pay attention to the little-valued metric, while his colleague Hannah Jones blamed the home office boom for the rise in prices
Boston, Massachusetts, ranks behind NYC on the list, recording a 72.9 percent increase
The fastest increase occurred 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 risen a modest 23.2 percent since May 2019.
Baltimore, Maryland, and San Jose, California, also underperformed in national land grabs, with increases of 24.8 percent and 26.3 percent, respectively.
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 and take out new mortgages at the much higher rates.
And that has left buyers desperately competing for the few homes that come onto the market, with more than a third of homes paid for in cash.
“The reality is that as interest rates rise or fall, as more or fewer homes come onto the market, prices will rise,” Wilk told the Boston Globe.
‘There is a lot of demand and there is an imbalance in supply, which means that demand continues to rise.’
Real estate agents counted 788,000 homes on the market in May, compared to almost 1.2 million in May 2019.
“We expect there will still be a significant gap between 2024 housing stock and the pre-pandemic housing market as it closes only gradually,” it wrote in its monthly housing market survey.
“The growth in the number of homes priced between $200,000 and $350,000 exceeded all other price categories.
Pictured: It now takes $1 million to buy this average single-family home in East Boston
But most of the list is dominated by cities in the South, with Nashville, Tennessee seeing a 68.6 percent increase in price per square foot.
Tampa, Florida is just one step behind with a 68 percent increase
‘This increase is again mainly fueled by a greater supply of smaller and more affordable homes in the South.’
But forecasters at financial analytics firm CoreLogic expect prices to fall in areas of the south in the coming year.
The Palm Bay-Melbourne-Titusville and Deltona-Daytona Beach-Ormond Beach regions of Florida will likely see price drops, as will the Atlanta-Sandy Springs-Roswell region of Georgia.
“While the housing market is still in seller’s territory, it is expected to shift in a buyer-friendly direction as mortgage rates decline again over the next year and the number of homes for sale increases,” Realtor wrote.