Housing affordability is slipping through the cracks as median US home prices have gone up 46% since the pandemic started.
The pandemic started a trend nicknamed “The Rise of the Rest” with the abrupt shift to remote work. The unprecedented acceleration in remote work has allowed tech hubs and bigger companies to move into less expensive areas. The move has helped revive struggling economies in one of the most challenging times in recent history.
However, due to the ongoing upward tick in inflation and other external factors that have affected the supply chain globally, home prices have increased at a record pace. Even rental rates in the 2022 US housing market have significantly gone up in recent months that Bloomberg dubbed “The Rise of the Rents,” in obvious jest of the other moniker.
According to Bloomberg’s article, the median price of US homes has more than tripled between 1992 and 2021, from $150,000 to roughly $500,000. To emphasize, let’s take a quick look at Redfin’s data showing how much median home prices have gone up in the following Sun Belt Metros:
| Metro | May 2022 Median Sale Price | Increase from May 2020 (%) |
| Cape Coral, FL | $420,000 | 72% |
| Austin, TX | $556,000 | 69% |
| North Port, FL | $475,000 | 67% |
| Provo, UT | $550,000 | 66% |
| Phoenix, AZ | $486,000 | 62% |
Between December 2020 and December 2021, the median US home prices ballooned by $52,667, outpacing the median income worker who makes $50,000 annually.
Housing has outpaced people in 25 of the 38 major US metropolitan areas. In other locations, home prices have increased by $100,000 since the pandemic, twice as much as the median household income.
Related: High Mortgage Rates Pushing Consumers to Rent Homes Instead of Buy
Median Home Prices by US State As of September 2022
Real estate prices inevitably go up as the years go by. This is called appreciation in real estate investing. However, other factors, such as inflation, inventory, housing demand, and supply chain issues, also affect how fast home prices rise. In this case, the pandemic has sped up appreciation in US home prices, making homeownership more elusive for many Americans.
To be fair, we already had a housing shortage before the pandemic. Home construction couldn’t catch up with the growing demand following the Great Recession of 2008. Housing demand only worsened as mortgage rates dropped to record lows in the middle of the pandemic, which saw them go to as low as 2.65%.
Related: When Will Mortgage Rates Go Down in 2022?
2021’s low mortgage rates pushed more people to buy homes, which inevitably drove home prices higher. That’s the fundamental law of supply and demand. This increase in demand somehow helped the struggling real estate industry recover and thrive amid COVID-19’s threat.
As geopolitical events and global supply chain issues persisted throughout 2022, home affordability has gone further and further away from the reach of regular people. The table below shows how median home prices changed between February 2022 and September 2022. The data was collected from real estate platform Mashvisor:
| State | Median Price (February 2022) | Median Price (September 2022) | Difference in
Percentage (%) |
| Alaska | $527,128 | $372,350 | -29.36% |
| Alabama | $648,647 | $737,517 | +13.70% |
| Arkansas | $511,436 | $494,920 | -3.23% |
| Arizona | $679,412 | $694,204 | +2.18% |
| California | $1,089,649 | $1,094,655 | +0.46% |
| Colorado | $969,752 | $985,459 | +1.62% |
| Connecticut | $585,914 | $654,177 | +11.65% |
| District of Columbia | $727,294 | $722,084 | -0.72% |
| Delaware | $614,711 | $682,287 | +11% |
| Florida | $680,781 | $657,052 | -3.48% |
| Georgia | $478,514 | $532,516 | +11.28% |
| Hawaii | $1,100,499 | $1,072,728 | -2.52% |
| Iowa | $250,479 | $301,254 | +20.27% |
| Idaho | $1,001,171 | $806,283 | -19.47% |
| Illinois | $513,187 | $574,538 | +11.95% |
| Indiana | $367,227 | $337,607 | -8.06% |
| Kansas | $462,769 | $436,821 | -5.61% |
| Kentucky | $346,798 | $351,388 | +1.32% |
| Louisiana | $478,052 | $481,418 | +0.70% |
| Massachusetts | $984,379 | $935,053 | -5.01% |
| Maryland | $535,748 | $519,448 | -3.04% |
| Maine | $682,957 | $702,765 | +2.90% |
| Michigan | $498,492 | $494,795 | -0.74% |
| Minnesota | $407,413 | $411,517 | +1.00% |
| Missouri | $342,416 | $374,037 | +9.23% |
| Mississippi | $392,396 | $379,607 | -3.26% |
| Montana | $744,126 | $915,104 | +22.98% |
| North Carolina | $529,354 | $554,358 | +4.72% |
| North Dakota | $245,339 | $286,230 | +16.67% |
| Nebraska | $369,068 | $344,872 | -6.56% |
| New Hampshire | $599,043 | $631,662 | +5.45% |
| New Jersey | $635,523 | $641,812 | +0.99% |
| New Mexico | $469,641 | $522,569 | +11.27% |
| Nevada | $690,868 | $557,207 | -19.35% |
| New York | $1,246,717 | $1,098,929 | -11.85% |
| Ohio | $347,308 | $354,833 | +2.17% |
| Oklahoma | $375,851 | $404,172 | +7.54% |
| Oregon | $644,520 | $675,975 | +4.88% |
| Pennsylvania | $511,411 | $360,103 | -29.59% |
| Rhode Island | $834,551 | $813,178 | -2.56% |
| South Carolina | $414,774 | $525,917 | +26.80% |
| South Dakota | $376,508 | $389,703 | +3.50% |
| Tennessee | $694,458 | $627,676 | -9.62% |
| Texas | $480,963 | $592,565 | +23.20% |
| Utah | $946,604 | $866,481 | -8.46% |
| Virginia | $507,951 | $530,164 | +4.37% |
| Vermont | $587,313 | $548,647 | -6.58% |
| Washington | $583,356 | $617,785 | +5.90% |
| Wisconsin | $404,617 | $396,373 | -2.04% |
| West Virginia | $336,847 | $310,595 | -7.79% |
| Wyoming | $1,180,202 | $1,353,840 | +14.71% |
As you can see, more than half of the US median home prices have gone up. The percentage of increase varies, with the lowest increase at +0.46% (California) and the highest at +26.80% (South Carolina).
With rising home prices and mortgage rates, homeownership is becoming quite challenging for most Americans. Inflation is bad enough to warrant substantial increases in rental rates, making housing a growing concern in the country.
Related: Rent Inflation Stays High But May Not Sustain Itself
How Are the High Median US Home Prices Affecting Real Estate Investors?
There are two ways of looking at this current situation. Whether it’s good news or bad, it largely depends on where you’re coming from. Literally.
Currently, the housing market is starting to cool down, mainly due to higher mortgage rates and increasing home prices. Because of the market softening, many sellers have begun to hold back as potential buyers are backing off and moving into rental spaces. This has caused several sellers to sell way below what they were originally asking for just to convert.
On the other hand, buyers are torn between renting and buying since there’s not much of a difference now between the two.
Real estate investors are in a different situation as most of them are either in it to rent out investment properties or flip them at a profit. Fix and flips might not be the best strategy at this time, given the higher median prices in the US today. Add to that the costs of home rehabilitation, and a property will wind up at above-median price levels.
However, a rental investment property might still work at this time, especially with the increasing housing prices. All an investor needs to do is look for the most affordable properties in profitable neighborhoods to get by. As rental rates go up, rental property owners are in a better position to get a good return on investment compared to house flippers.
Even if the real estate market cools down, you still have skyrocketing mortgage rates that will affect consumer behavior. At this point, renting is still a more practical solution to the housing problem in the US.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
As home prices rise at unprecedented levels, Mashvisor can help you find the most affordable investment properties.
Wrapping It Up
Median US home prices may have been up by 46% since the onset of the pandemic, but nearly half of the national market is experiencing price drops. It is one of the indicators that the market is cooling. If you’re looking for income properties for sale at this time, use Mashvisor to help you locate the most affordable real estate with the best cash on cash return.
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