The price of home ownership is soaring, even as the nation’s population grows and its cost of living grows.
In fact, it’s a bigger issue than it’s been in years.
Homeownership is expected to hit $1.7 trillion by 2025, and the average cost of a home in the U.S. has increased an average of 3.5 percent annually since 2010, according to the Federal Reserve.
That means more money for the federal government, which is spending a record $7 trillion on housing over the next five years.
But it’s not just the cost of housing that’s rising, the price and quality of homes are also on the rise.
“In the last two years, home prices have risen by more than 20 percent nationwide,” said Tom Schatz, chief economist for Zillow.
“And the price is rising in many areas of the country, especially among lower-income families.”
In many cities, the median home price is $300,000.
That means people are buying homes at significantly lower prices than the typical person who is trying to save for retirement or move out of a rental.
“You can’t just buy a $300k house and live in it forever,” said Schatz.
“You have to be able to buy that home at a reasonable price.
So the question is: What are the other costs?
And what’s the most important?”
Many of these are now being addressed by home builders.
Some of them are doing what they can to make their buildings affordable.
But that isn’t enough.
“The way to make it affordable for the middle class is to go out and build these more affordable, better-quality homes,” said Dan Sperling, chief executive officer of HomeAway, a New York-based company that offers rental assistance.
“Homeowners need to be getting out of their basements and putting money toward a house, not an RV or a trailer,” said Sperle.
“It’s important for them to buy a house at a decent price,” said Chris Roesch, director of research for the nonprofit National Association of Home Builders.
He added that “the majority of homes in the market today are not priced at $300K.
They are priced at between $100,000 and $150,000.”
Still, the real estate market remains a mixed bag.
Rising home prices and a growing number of renters have been pushing for affordable housing, and more and more places are doing the same.
But it’s an uphill battle.
Home owners aren’t making the same gains as renters and homeowners in some ways.
They’ve spent more on renovations and maintenance than renters have in their lifetimes.
And they’re paying a higher price for the same house.
That makes them less likely to buy in their home market.
“When it comes to affordability, the biggest issue for the bottom 95 percent is still the cost,” said Mark Johnson, senior vice president of mortgage and equity research at S&P Global Ratings.
“It’s still a problem in the suburbs and the city, as well as in the cities.
But if you’re really in the middle of the pack, you’re still going to be priced at the very top end.”
Roeves said there are also a few key factors that are working in favor of home buyers.
First, the affordability of the home is increasing.
That includes affordability of utilities, mortgage interest rates, taxes and insurance.
“These are the same costs that renters and home buyers face,” he said.
“The question is, can the home market continue to accommodate those costs without making home ownership unaffordable for a large percentage of people?”
Another factor is that “there’s no question that there are more homeownership opportunities in the city than there are in the country,” Roesches said.
And that, he said, is “a huge opportunity for builders.”