Home Values Are Climbing Faster Than Salaries

March 23, 2022 Topic: Housing Region: United States Blog Brand: Politics Tags: Rent PricesMortgagesInterest RatesInflationReal Estate

Home Values Are Climbing Faster Than Salaries

The average value of homes in some California communities increased by as much as six figures during 2021, according to research from Zillow.


Home prices across the United States are surging so fast that the 2021 home value growth has exceeded the median salaries in twenty-five of thirty-eight major metropolitan centers, according to Zillow.

“Home values have been rising throughout the pandemic, but they’re starting to get a little ridiculous,” Fortune wrote. “In some U.S. cities, your home’s appreciation over the past year may be worth more than your annual salary.”


Six-Figure Difference

In every city measured in California, the difference between the home value growth and salaries eclipsed six figures. They include: San Jose-Sunnyvale-Santa Clara ($136,277), San Francisco-Oakland-Hayward ($129,914), and San Diego-Carlsbad ($105,790). Urban Honolulu, Hawaii, came in next at $87,254.

“2021 was a year of haves and have-nots, and the chasm between the two widening throughout,” Zillow’s researchers wrote. “Those who owned a home saw their household wealth increase dramatically. But many renters witnessed that dream either soar out of reach or had to drastically adjust their expectations and plans.”  

The company said that the typical value of a middle-tier U.S. home is now $331,533, which is up more than 20 percent compared to January 2021. Rent prices have also surged 16 percent across the country. In popular warm-climate cities like Miami, Phoenix, and Las Vegas, rents have risen as high as 25 percent.

“Escalating prices everywhere folks turn, from food to housing, are going to make it harder for buyers, particularly first-time buyers, to save up for a down payment and closing costs, and to afford monthly housing payments,” Realtor.com wrote. “Some will be priced out of the homes and neighborhoods they had their hearts set on, and will move farther out, to more affordable areas, or purchase smaller homes and fixer-uppers. Others grappling with steep rent hikes and ballooning grocery and energy bills won’t be able financially to become homeowners.”

More Hawkish Fed

Mortgage rates, which recently surpassed 4 percent for the first time in three years, are driving some homebuyers to rush into the market before they get even more priced out. Adding to the concerns is that a more hawkish Fed could potentially push those rates even higher, which would likely mean higher monthly payments that fewer buyers can afford.

According to CNBC, Federal Reserve Chairman Jerome Powell on Monday reiterated that rate hikes would continue until inflation, which has reached a four-decade high, is contained.

“We will take the necessary steps to ensure a return to price stability,” he said in prepared remarks for the National Association for Business Economics. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.