How Much Do Americans Think a Home Costs on Average?
Does It Matter?
What Americans understand about the price of a home can differ from state to state, city to city, from one town to another. If you were to ask a group of people how much they thought a home cost in America, you’d probably get very different answers depending on where you are. That being said, in general, even first-time buyers probably have a decent idea of what a home should cost them. But, is this number accurate or even realistic? And, why is it important?
A Brief History of Home-Ownership in America
If a first-time millennial buyer were to ask their much older grandparents how much they had paid for their home, they’d guffaw at the answer. And the interest rate on that mortgage? Their jaw would drop to the floor. But, believe it or not, although it seems that it would be much more, the median cost of a home in America nowadays is less than $200,000. In 1970, almost 50 years ago, the median cost was close to $23,000. Adjusted for inflation, that’s about $150,000. Not much of a difference.
Fast-forward back to today, and $200,000 is likely much less than what you and your neighbor are actually paying for your home. So, why is it then, that Americans can’t put their finger on what a home in the U.S. costs on average? And, if they can, why are they shopping way out of that price range?
The Monthly Cost of Owning a Home
Despite these numbers, according to the U.S. Census Bureau, the real average cost of owning a home is closer to $360,000 than $200k. But that’s just the mortgage, which on average, Americans take out at $309,200. But, there’s more. A lot more. And, when we look at the price of a home, we can’t just take that at face value. We need to break it down and look at how much a home costs on a monthly basis.
So, first there is the monthly payment you owe on your mortgage. Then, there are maintenance fees. These include homeowner’s insurance, repairs and general maintenance, utility bills, property taxes, etc. This means that homeowners can be paying anywhere between $500 and $1,999 on a their monthly home expenses. There’s clearly a huge disparity. Could this be why there’s no clear answer on what people think the average cost of a home is in America? Or, is it just because people living in Los Angeles have no idea what a home costs in St. Louis, Missouri, and vice versa?
Perhaps it’s a little bit of both.
Housing Prices Are Still Increasing
While many Americans may not agree on one particular figure when it comes to estimating the average price of a home, there is one thing they can agree on: the price of a home in the United States is still rapidly increasing. According to the Economy and Personal Finance survey done by Gallup, 64% of Americans surveyed believed that the cost of homes in their neighborhood will continue to increase, while 26% expected prices to stay the same and only 10% thought the prices would go down.
Though many people may feel that the housing market isn’t doing so well, it’s clear that the high demand and limited supply of homes is making the prices go up. Therefore, experts are encouraging people to buy a home now, before prices continue to rise — much higher than what’s considered “average.”
Being Transparent as a Broker
So, why is this all important? Why does it matter how people collectively think about the prices of homes? Is there even such a thing as an “average” price anymore?
Well, to start, if you were a bit confused by those numbers mentioned earlier, then it’s clear that people really don’t have clear expectations about what it costs to buy a home. They may know that it’s expensive and they may know how the price of their home compares to others in their neighborhood. But, they may not know whether or not the price of their home is above or below what’s considered average in America overall.
There’s a huge gap in the prices of homes in America — there’s no doubt about that. But, that’s not really the issue. The issue is that people can sometimes be uninformed.
At the end of the day, real estate brokers have a lot more experience when it comes to pricing a home. Their job is to evaluate the house and determine what it’s worth, so that their client can get the best deal available. If you ask a broker how much a house cost in a certain neighborhood, they know the answer immediately. If you ask them if the house in on par with the rest of the homes in America, you might get a “Sure” or “Well, you know prices aren’t what they used to be…”
The point is, America is a big country and the housing market is constantly changing. Though there may be an average price of homes, that information can’t be used to determine whether or not a house is priced correctly. There is no true average price. And, even if there was, that price is not indicative of anything. People like to think they know what’s going on with the housing market, or that a home is “way overpriced” or “way undervalued.” Only brokers truly know what’s considered a good deal for the client at hand.