The number of US cities where first-time homebuyers are faced with at least a $1 million price tag on the average entry-level home has nearly tripled in the past five years, according to new research.
A Thursday report from Zillow indicates that a typical starter home is now worth $1 million or more in 237 cities, up from 84 cities in 2019, underscoring America’s ongoing home affordability crisis.
“Affordability has been strained across the board,” Orphe Divounguy, a senior economist at Zillow, said. “We see the largest number of million-dollar starter homes in expensive coastal markets. We see them in markets with very low homeownership rates and we see them in markets with more building regulations.”
People aren’t selling, because their tax bill will 10x at whatever place they downsize to. The older generations are all living in 5+ bedroom homes with 1 or 2 people while young people are raising families in 1br apartments. It means that across the state communities are dying out and young people just aren’t having families anymore. On top of this, suburban sprawl is completely out of hand because all the people who bought before prop 13 was passed were living in the metropolises since they were working age. Now that they are retired they still live where the jobs are, and the young working people have to commute 2+hrs each way to get to their jobs.
The people with a 5 bedroom house could sell for so much money they wouldn’t care about the tax bill at the new place. Going from 5 bedrooms to two bedrooms means you could outright buy the new place and have 2 million dollars left over. At that point you’re crying into your Scrooge sized bank account about property taxes.
And if you’re worried about the people who bought condos or other small city homes staying there until they die, that’s the point. The entire point was to prevent people being pushed out of their homes.
It never stopped people from buying a smaller house or moving for new jobs. Not building enough housing to cover the natural rise in population is the reason we are here. Insisting that all new housing be single family detached housing in suburbs is why we’re here. Those are far more impactful things than the people who just never move.
They may not have much money left over after downsizing, however. In markets like California the value is almost entirely from the land. The comparative value of the house (even a 5 bed) is comparatively negligible. So a 5 bed on a small plot would cost almost the same as a 1 bed on the same plot. In Silicon Valley it’s really common to just buy a house and knock it down and rebuild, since the cost of building a new house is much less than the cost of the land.
It’s a genuine issue that the liquidity of the real estate market is impacted by this.