How Much a Starter Home Cost the Year You Were Born — and What It Costs Now
A starter home may cost far more today than it did when millennials were born, but the bigger change is affordability.
In the 1990s, a typical home cost a little more than three times the median household income, according to Harvard University housing researchers.
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Also according to Harvard University, that figure is closer to five times income today, helping explain why many buyers feel homeownership is getting harder to reach.
As home prices have outpaced wage growth, the path to homeownership has become more challenging for many first-time buyers. Here's how much a starter home cost the year you were born and what it costs now.
If You Were Born in 1981
Median home price: $68,400
Household income: $22,390
The first millennials were born into a housing market that looked very different than today’s.
Zillow estimates the average price for a starter home today is $198,648, compared with median household income of about $81,604, according to Census data.
While home prices were lower, experts say comparing prices alone doesn’t tell the full truth.
“The greatest mistake people make when comparing prices paid by them and their parents back in the day is that they only focus on the price paid,” said Cody Schuiteboer, president and CEO of Best Interest Financial.
“People do not buy a price. They buy a mortgage payment based on price, interest rates and down payment,” he added.
If You Were Born in 1985
Median home price: $87,000
Household income: $23,620
By the time the oldest millennials were heading off to kindergarten, home prices and incomes had both increased from their 1981 levels, continuing a trend that would shape the housing market for decades.
If You Were Born in 1990
Median home price: $127,000
Household income: $29,943
As the first millennials settled into elementary school, home prices were rising faster than household income.
Compared with 1985, the median home price had increased by roughly $40,000, while median household income rose by about $6,300.
“Home prices have grown faster than wages during the past 40 years, which implies that down payment, usually the toughest thing to manage, takes about a decade now to save instead of about five years as it happened in the past,” Schuiteboer said.
If You Were Born in 1995
Median home price: $138,600
Household income: $34,076
In 1995, older millennials were growing up on "Saved by the Bell" and a starter home was still widely viewed as the first step on the path of homeownership rather than a long-term destination.
“Buyers expected to purchase a modest home, build equity and move up later,” said Jon Brooks, cofounder and housing analyst at Momentum Realty. “Today, many buyers are stretching financially just to secure their first ‘starter home.’”
When Was the Best Time To Buy a Starter Home?
Housing experts often point to the years following the 2008 financial crisis as a rare opportunity for first-time buyers.
“Home prices dropped, mortgage rates fell and there was not much competition on the market at that time,” said Ksenia Levina, founder of Vienna Property Investment.
However, only some older millennials were able to take advantage of that window. Others were still dealing with layoffs, stagnant wages and the broader fallout from the recession.
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Editor's note: Home-price figures are based on U.S. Census Bureau data tracking the median sales price of new homes sold in the United States, while income figures come from Census household income data.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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