For most Americans, owning a home is now a distant dream
February 21, 2022 / 7:00 AM
By Aimee Picchi
Home prices across the U.S. are surging, while a shortage of houses for sale has resulted in cut-throat competition for those in the market to buy a property. That confluence of trends has taken the dream of homeownership well beyond the means of middle-class Americans, who are increasingly up against higher-income buyers for a smaller pool of homes.
Nationwide, there are only about 250,000 homes currently for sale that are considered affordable for households with between $75,000 and $100,000 in annual income — a sharp decline from the roughly 656,000 available homes prior to the COVID-19 pandemic, a recent analysisby the National Association of Realtors (NAR) found.
This means there are now about 65 households in that income bracket for one listing, up from 24 households in 2019.
In many cases, it's also no longer enough for a prospective buyer to come prepared with a downpayment and a pre-approved mortgage. About 30% of homes were bought with all-cash offers in 2021, up from about 25% in 2020, according to real estate firm Redfin. In some cities, such as West Palm Beach and Naples, Florida, more than 50% of purchases were all-cash deals. Sellers are demanding that buyers forego contingencies, including for financing and inspections.
Another sign of the times: The U.S. now has almost 500 cities where the average cost of a home has hit $1 million, according to Zillow.
"Unfortunately, the middle-class dream of homeownership has been fading away," Redfin chief economist Daryl Fairweather told CBS MoneyWatch. Owning a home in the U.S., he said, "is a signifier of the upper class now."
Welcome to year three of the pandemic real estate market, which experts described to CBS MoneyWatch as "deeply stressful" and "ultra-competitive." That comes after a heated property market in 2021, when the median sale price of existing homes rose about 16% to almost $360,000, according to NAR.
Not enough homes
Compared with a year ago, the market has become even tougher for homebuyers to navigate. Not only has inventory dwindled, but first-time homebuyers are competing against investors and current homeowners who have built up equity during the past two years of rising home prices and who therefore have more money to spend on housing.
"It's worse, believe it or not — it is objectively worse," Fairweather said. "There aren't enough homes for everyone who wants to buy them."
The pandemic's shift to work-from-home has allowed white-collar workers to relocate from high-priced regions to cities with a lower cost of living — making housing more competitive for locals in the those markets. Out-of-town buyers typically have 30% more to spend on a home than existing residents, Redfin found in a recent report.
Scarce, expensive, scarce housing used to be the norm mostly in big coastal cities like San Francisco and New York, but that's now spread to smaller regional cities like Nashville, Tennessee, and Austin, Texas.
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For most Americans, owning a home is now a distant dream
