The average sales price for new homes in the US climbed to $485,000 in February 2024, against a backdrop of a per capita income of $41,261. This discrepancy highlights that the average American is priced out of affording a new home.
Escalating home prices are creating barriers to hiring civilian personnel in areas with high living costs, particularly near resort locations. A prime example is Steamboat Springs, Colorado, which struggles to fill job vacancies. The city reports that recent candidates have turned down a municipal job offering a yearly salary of $167,000. Given that the median home price in Steamboat Springs is $1.3 million, it’s easy to see why. A similar situation is unfolding in Walton County, Florida, where the median home sold price in 2023 was $631,000. In recent comments, the Walton County Sheriff lamented the fact that essential public service roles like teachers, police officers, and firefighters find it unaffordable to reside in the beach communities they serve, complicating efforts to recruit for positions critical to public welfare and safety.
Recent data on residential sales underscore the persistent affordability challenge in the housing market:
New Home Inventory Levels: As of February 2024, the US supply of new homes stands at 8.40 months, reaching the highest level seen in the past four years. However, the housing market continues to struggle with a growing shortage of new homes, the result of more than a decade of under-building relative to household formations. While 2023 saw a 6% year-over-year decline in single-family housing starts, this trend is expected to reverse itself in 2024 as builder confidence surges.
New Home Sales Pace: Sales of new homes have accelerated to reach a pace not seen in over a year reaching a seasonally adjusted rate of 662,000 in February 2024. This suggests that demand for new homes remains strong fueled by a robust job market, despite persistent obstacles of higher borrowing costs.
Median Sales Price of a Home: The median sales price for existing homes has reached a new peak at $400,500, marking a significant increase in the cost of buying a home. This surge is particularly challenging for first-time buyers, who face an average down payment of 6%, as reported by Rocket Mortgage. Coupled with inflation and the burden of college debt, saving for an initial home purchase has become a significant hurdle for these buyers.
Existing Home Availability: While the inventory of new homes is up, the number of existing homes available for sale remains below historical norms at a 2.9-month supply. This scarcity contributes to the competitive real estate market, particularly for affordable and mid-priced homes, and may continue to drive prices up in the absence of a significant increase in supply.