It used to be that a $400,000 house was something only the rich could buy. Last year, the National Association of Realtors said the median home price for homes for sale was $386,300. That number already has started to drop.
How did the average home price get so high? It was a combination of people working from home and the lowest mortgage rates in years. The jump was so sharp that in several places, like San Jose, the prices of homes sold topped $1 million. Only Silicon Valley employees and venture capitalists could afford them. (Click here for cities where home values have risen the most since 2000.)
Elsewhere, people streamed from the most expensive home markets, mainly on the Atlantic and Pacific coasts, to smaller cities inland. Boise was one example. Home prices rose 70% at one point last year. People went to the city for modest-priced housing only to find it had developed into one of the most expensive markets in the county. Prices in Boise have started to fall rapidly, but it is no longer a housing market for the middle class.
Through much of the early part of last year, home prices rose by 20% each month, according to the S&P Case-Shiller home price index. That growth rate has collapsed. In the meantime, cities such as Tampa and Phoenix had the highest home prices on record.
The home market may never see that $400,000 price again. People are no longer relocating in droves because they can work from home. Companies are calling workers back to part-time or full-time office work. And a 3% mortgage rate was an anomaly created by Federal Reserve rates that were unusually low.
Last year was an excellent year for sellers and a difficult one for buyers. The mix pushed home prices to record levels.
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