Skyrocketing housing prices in 2021 turned homes into windfalls for owners, some of whom earned more money thanks to the rise in the value of their property than they brought home in salary from their job.
Citing a study by the Zillow Group, the Wall Street Journal is reporting the typical value of a home in the U.S. rose 19.6% in 2021 to $321,634, an increase of $52,667 from 2020 — more than the median income of a full-time worker, which was about $50,000 in 2021.
It was the first time since Zillow began crunching the numbers in 2000 that the value of a typical home was greater than inflation-adjusted median pretax income.
Home values surged around the country last year thanks to low mortgage rates and remote work allowing some to relocate from expensive cities to less expensive towns — which jacked up prices as the newcomers outbid the locals.
For some homeowners, the swing between wages and home values was remarkably wide. In San Diego, for instance, typical homes increased in value by $160,000, while the typical worker there brings in about $55,000 — a difference of more than $100,000.
But while the higher prices were was a boon to sellers, they made it more difficult for new buyers looking to enter the housing market for the first time with less money down.
“The people who are winning the housing bids, typically, are folks who have higher incomes or have the equity from their previous home that they’re able to put forward,” Nicole Bachaud, an economist at Zillow, told the newspaper. “That’s definitely a big challenge, I think, when we consider first-time buyers, renters, people who don’t already own a home and aren’t really benefiting from that equity.”
All told, homeowners in the U.S. holding mortgages gained more than $3.2 million in equity last year compared to 2020, according to the report.
[Wall Street Journal] — Vince DiMiceli