Today, food, gas, electric, and entertainment prices are all more affordable than they’ve been at any other point in American history, in absolute terms. However, as many individuals have noticed, the cost benefits enjoyed by countless sectors of the economy have not transferred to the housing industry. On the contrary, houses are more expensive to rent and to purchase today than they were 20, 30, 50, and even 100 years ago.
This phenomenon has aggravated future homeowners and disrupted countless carefully crafted financial plans. Potential remedies are commonly put forth and rarely agreed upon, and as such, this piece will aim to highlight the causes of expensive home and property prices, as opposed to measures intended to fix them. Let’s take a look!
A Massive National Population
The incremental increase in housing and property prices in the United States can be at least partially attributed to the country’s bigger-than-ever population. Although over 320 million citizens call America home (or more than three times as many citizens as there were in 1900), the US hasn’t increased in geographical size—barring the admission of Hawaii and Alaska into the Union, that is!
Thus, more people create more demand for property and places to live, which in turn raises prices.
Large Employers are Already Fleeing High-Tax Areas
Next, the consistent increase in American housing prices is in part the result of large employers deciding to flee high-tax areas. For most Americans, a higher or lower tax rate could be the difference between buying a nice new television, paying down debt, or enjoying a beautiful vacation. For businesses, however, a higher or lower tax rate could be the difference between profitability and bankruptcy, to the tune of millions or billions of dollars. Furthermore, an enormous tax burden on employees means a company’s wages won’t go as far, and they may be expected to increase salaries, which can also inhibit profit margins.
Big and small employers alike fleeing high-tax areas has rendered other, typically inexpensive regions pricier regarding housing, because of the increase in demand brought on by the influx of new residents (i.e., company employees). In California, companies like Weatherby are fleeing outright, whereas companies like Adobe or Toby Scammell’s Womply are expanding into surrounding low tax states while retaining their domestic headquarters. These shifts are less visible and may not constitute an actual reduction in employment, but that is an expansion that is happening into a low-cost area that might otherwise have happened in Silicon Valley
This shift in employment and the resulting shift in population is driving up rents in the areas receiving the incoming companies, whereas coastal areas’ rent inflation is lagging behind the national average. This is good news for renters in New Jersey or Portland, but only if they can endure the higher cost of living.
More In-Depth Construction
Lastly, housing prices have increased because construction is more in-depth than ever before. Specific materials, building procedures, safety concerns, waterproofing, heating and air conditioning systems, and much more all mean that houses cost a more substantial amount to build, repair, and of course, buy.
Although today’s housing prices are considerable, prospective buyers and renters can still find a home that meets their wants and needs, so long as they take their time while browsing the market and pay attention to budgetary constraints.