Why is the housing market so expensive?

Out of reach

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Over the past few decades, the cost of buying a home has risen dramatically. It's a dream that can seem out of reach for many people who want to get their start.

Continuing the upwards trend

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

In 2024, US house prices saw moderate growth, with increases ranging from 3% to 5%. In 2025, they are projected to rise by approximately 4%. One of the main issues currently is that demand continues to outstrip supply.

The pandemic effect

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

At the outset of the COVID-19 pandemic, the government decided to reduce interest rates so the economy would receive a boost.

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

At the same time, the economic and political instability of the market during the pandemic saw many sellers withdrawing.

Lower interest rate effect

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

When interest rates are lowered, the cost of financing a home decreases for buyers. When this occurs, it's normal for more prospective buyers to decide it's a good time to buy.

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

However, if the interest rate is low for a long time, it drives up demand. This is turn increases the average asking price for a home.

Millennial purchasing

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

A whole generation of prospective property buyers has reached the age where they are seeking to become homeowners: millennials.

Building materials

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Not all building materials needed to build houses can be sourced locally or even nationally. Trade agreements and political developments impact the cost of importing building materials.

Lower builder trust

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Generally, there has been a decrease in the amount of homes being built. This is a more recent development in the housing market.

State subsidies

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

State subsidies put in place to help first-time buyers enter the market were a way the government offered assistance to help with the cost of purchasing a home. Unfortunately, they may also have contributed to higher prices as buyers were able to pay more for property.

More zoning regulations

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Since 1940, there have been a number of amendments to laws regarding construction and zoning regulations. These have reduced the potential density of housing, particularly in metropolitan areas, driving prices up.

The boomer effect

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Baby boomers are creating more households as they age. Despite the increase in millennial buyers overall, their numbers are actually eclipsed by the number of people in the 65-74 and 75+ age groups buying homes.

Location, location, location

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Depending on where you want to buy, house prices can be more expensive. In the Northeast of the US, prices have increased much faster and more noticeably than in the South or Midwest.

Past prices

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Since the 1940s, house prices have been steadily increasing. In the 1970s, the highest increase in house prices occurred, as they rose by 43%.

Investor impact

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

It's not all bad news. If you're an investor, higher prices can mean a higher return on your investment in the long run.

Purchase with a partner

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

It's less expensive to purchase when buying with another person. Whether that's a life partner, a friend, or a family member, consider splitting the cost and building equity with another person to make owning a reality.

Compromise on size

Out of reach, Continuing the upwards trend, The pandemic effect, Lower interest rate effect, Millennial purchasing, Building materials, Lower builder trust, State subsidies, More zoning regulations, The boomer effect, Location, location, location, Past prices, Investor impact, Purchase with a partner, Compromise on size

Be realistic about the amount of space you really need. Think about purchasing a smaller home with less square footage to get your first step on the housing ladder.

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