Cities with an average home price of $1 million tripled last year
The number of “million-dollar cities” with real estate listing values exceeding $1 million on average has tripled since 2020, according to recent data from Zillow.
With the average price of a home up 19.6% last year, according to Zillow, 146 new “million dollar cities” were added in 2021 – the most on record in a year – bringing the total number to a new high of 481.
While Idaho, Montana and Tennessee gained million dollar cities for the first time, California, Massachusetts and New York added the most new cities with higher average home values at $1 million. Most million-dollar cities are located in major coastal regions, such as Los Angeles and San Francisco, with 44% in California.
“The surge in demand for housing last year sent home values skyrocketing, even in places where prices were already very high, and that helped tip a record number of cities into the club of million,” said Jeff Tucker, senior economist at Zillow.
The median price of a home in the United States is now $408,100, up $85,500 from January 2020, according to price information from the St. Louis Fed.
The dramatic increase in median home prices is largely the result of a long-standing home shortage, exacerbated by high demand and construction disruptions during the pandemic.
First-time buyers are overpriced
Escalating home prices have made it even more difficult for first-time home buyers to afford a property.
The median down payment for first-time buyers is 7% of the total cost of the home, according to a 2020 survey by the National Association of Realtors. This equates to a down payment of about $70,000 for an average home in a million dollar city.
Considering that millennials, many of whom are buying homes for the first time, have average personal savings of $63,300 and often have high student loan debt, many simply can’t afford to cover the down payment on a new house.
There are federal and state programs that offer first-time homeowner incentives, like Federal Housing Administration (FHA) loans, but they come with restrictions, like mandatory down payment insurance and a price cap of $647,200. $ in most markets.
These programs offer what’s called “jumbo” mortgages for markets with million-dollar homes, but they have stricter guidelines for borrowers, larger down payment requirements, and lower interest rates. sometimes higher interest, according to the Washington Post. You can view the FHA loan limit in your country using this list.
However, “government programs are not enough,” says Desh Weragoda, chief technology officer for mortgage lender MBANC. “Look at any open house – they’re packed. The competition and demand is so high that even if you have government help, someone else might come with 50% down payment.”
While rising mortgage rates are expected to cool the housing market somewhat, experts expect house prices to continue to grow in 2022, albeit at a more modest pace compared to 2021.
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