Home prices per square foot are almost 60 percent higher than they were five years ago, prior to the pandemic.
Citing numbers from Realtor.com, Scotsman Guide, a publisher that caters to mortgage lenders, said that median list prices for home had grown 37.5 percent during the same time frame, but the more dramatic increase was in the square foot price, which was up 57.5 percent.
Realtor.com suggested that the disparity may be caused by more smaller homes being put up for sale, which would have a dampening effect on the overall median list price but not — or not as much — on the price per square foot.
So, are these price increases a good or a bad thing?
The answer to that depends on your current situation.
“In addition to higher median list prices and fewer homes for sale versus 2019, the increase in median price-per-square foot suggests that the typical home on the market today is worth 52.7% more than before the pandemic, more than double the roughly 23% increase in consumer price inflation in this period,” said Danielle Hale, Realtor.com’s chief economist.
“The specifics will vary from market to market, but the data suggest ongoing opportunity for many sellers,” he suggested.
“Though with mortgage rates still much higher than many existing homeowners enjoy,” Hale qualified, “this opportunity favors sellers who don’t have to replace a mortgage, such as investors or second homeowners looking for an exit or equity-rich homeowners looking to downsize in their current area or to a lower-cost region, as well as those planning to rent their next home.”
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Some markets saw growth higher than the average, of course. Scotsman Guide called out three specifically — New York with 84.7 percent growth in price per square foot, Boston with 72.9 percent, and Nashville with 68.6 percent.
All of this is great news for most homeowners in most markets, of course, especially those for whom their primary residence is their largest investment.
It’s also probably good news for those homeowners who are planning to sell their homes soon — assuming they can deal with the capital gains tax on their profits, of course.
Rising prices also mean that homeowners with mortgages may still be able to take cash out of their homes with a home equity loan or line of credit.
On the other hand, those who aren’t yet homeowners may find it difficult to change that in the current market.
Higher inflation puts pressure on the fed to keep interest rates elevated, which in turn makes mortgage rates higher and more difficult to afford for lower-income families.
That, in turn, drives up demand for rental properties, as those folks who can’t buy their own home still need to put a roof over their heads.
And more demand for rental property means rents rise, making it that much harder for renting families to save money towards an eventual home purchase.
Hope may be on the horizon for those hoping to purchase a home in the next year or two, however, as inventories of homes for sale are rising, according to Realtor.com economic data manager Sabrina Speianu.
“While the housing market is still in the seller’s territory, it is expected to shift in a buyer-friendly direction as mortgage rates resume their decline over the next year and the number of homes for sale increases,” Speianu said.
