A recent report from Zillow found that entry-level home prices in the United States are rising faster than any other category, but that doesn’t mean that buying a home is more expensive than ever before (that distinction belongs to 2006, at the peak of the housing bubble). The real estate company provided Curbed with more than 20 years of market data for the top 35 largest metro areas in the country, and we took a deep dive to see how starter home prices have changed over the last two decades.
Zillow provided three different sets of data: the median price for starter homes dating back to April 1996 for the largest 35 metropolitan areas that they have stats for; an inventory breakdown showing the amount of homes available in the bottom, middle, and top price tiers; and breakdown of how much of their income renters and homeowners can expect to spend each month on rent or a mortgage.
To make the numbers easier to digest, we created a series of charts to highlight the most interesting figures. Note that in some instances, Zillow did not have every metric for every city, so, for example, there is price and affordability information for Houston and San Antonio, but no stats on inventory.
There are a few key takeaways:
- You will spend less of your income on a mortgage than on rent in every major metropolitan area in the country. The chart above shows the mortgage versus rent history for the entire country, and most cities follow this same trajectory. Rents have steadily risen since 1979, while mortgage prices have fluctuated with the economy.
- It’s not all bad! Yes, there are a few very expensive cities (the median price of a starter home in San Jose, California is $610,900), but there are nearly a dozen big cities where less than $100,000 can buy your first house. See the chart below for a comparison of current starter home prices.
- Competition for entry-level homes is fierce. In nearly every city, less than a third of the housing inventory is in the bottom tier price range, so buyers can expect bidding wars and a competitive market.
The graphic above compares entry-level home prices from 1996 to 2016 in two dozen of the largest markets in the United States. A few trends jump out. Prices for entry-level homes peaked in 2006-07, and they have increased the most on the West Coast over the last two decades. San Francisco, Los Angeles, Seattle, San Diego, Riverside, Portland, Sacramento, and San Jose have all seen prices double—and in some cases, nearly triple. In comparison, only Boston, Miami, and Washington, D.C. have seen 100 percent increases (though prices in New York and Baltimore are up 93 and 96 percent).
California also experienced some of the most volatile price changes during boom and bust in the aughts. Let's look at San Francisco, currently the most expensive city in the country, as an example. In 2006, the price of a starter home peaked at $501,000, a 54 percent increase from just three years prior. Prices then dropped by more than half over the next six years, bottoming out in 2012. Since then, they've once again nearly doubled. A first-time homebuyer now needs $450,600 to buy a house in San Francisco.
A few smaller cities were less affected by the bubble; Pittsburgh's housing market remained steady, with entry-level home prices rising slightly, not dropping after the market crashed.
The chart above shows the current median price for an entry-level home in the largest metro areas. San Jose is far and away the most expensive. At $610,900, buying an entry-level home costs more than three times what it did in 1996 when the price was $177,900 (thanks Silicon Valley!).
Unsurprisingly, Detroit is the cheapest city to become a homeowner. The median price of a starter home is just $42,200—42 percent less than you would have paid 20 years ago. Cleveland, Ohio is the only other major city where it is cheaper to break into the housing market than it was two decades ago. A starter home costs $62,000 today, compared to $65,200 in 1996.
The table above lets you compare the current cost of an entry-level home to the amount of inventory available, as well as how much of your income you would spent on rent or a mortgage.
- San Jose has the most available inventory—more than 35 percent—in the starter home price range. But with a median entry-level home costing $610,900, this is a high price to break in to the housing market.
- Dallas-Fort Worth has the least available entry-level inventory, with just 13 percent. DFW also has the most saturated top tier market, with 64.5 percent.