At the turn of the century, the average U.S. home value was $126,000. Today, that figure is at a record high $259,000 – a 106% increase in just two decades.
Of course, the path from A to B was anything but linear with a financial crisis, housing bubbles in major cities, and now COVID-19, which is drastically altering market dynamics.
How has the housing market evolved, on a city-by-city basis?
Two Decades of Housing Prices
The interactive visual below – created by Avison Young Global, using data from Zillow – is a comprehensive look at U.S. home price data over the past two decades.
Editor’s note: Click the circles at the top of the visualization to see other versions of the data, including price changes at the state and zip code level.
The Lay of the Land
A number of things become apparent when looking at historical data of hundreds of U.S. cities.
First, the trajectory of home prices is defined by the 2008 Financial Crisis. After prices took a steep dive, it took a full decade for the average home price to rise back up to the 2007 peak.
Next, broadly speaking, the U.S. average is being “pulled up” by the hottest regional markets. The majority of housing markets have seen between a 50% and 100% increase in price over the past 20 years. This is also true at the state level, where booming markets such as Hawaii saw price increases double the U.S. average.
The West Coast has seen dramatic home price appreciation in over the last two decades, a trend that permeated the entire region. Every single city tracked in this database beat the U.S. average.
California and Hawaii saw the biggest gains, with a number of cities ending up with a 200%+ increase over prices in 2000.
The biggest gains in the entire country over the time period was Madera, California, which is located just north of Fresno. The nearby cities of San Jose and San Francisco rose by an impressive 235% and 219%, respectively. As a practical example – during the meteoric rise of Silicon Valley, average prices in San Francisco shot up from $364,000 to $1.12 million.
Even the bottom city (Yakima, Washington) on the left coast saw an increase of 114%.
Slower Home Price Changes
In general, cities located in America’s “Rust Belt” states saw slower home price growth. In fact, every city in these five states saw price growth below the U.S. average.
Of the top 20 U.S. metros, Detroit and Chicago saw the slowest price growth over the past two decades. Flint, Michigan, was the only city in the country to see a price decline.
At the state level, Illinois, Michigan, and Ohio were the bottom three in terms of home price appreciation.
A Useful Barometer
Looking at country or state level data fails to capture the incredible nuance of home values around the country.
That said, since the value of a primary residence makes a significant portion of wealth for most Americans, these price movements serve as a useful barometer of the health of the real estate market, and the economy as a whole.
Mapped: The Salary You Need to Buy a Home in 50 U.S. Cities
Is owning a home still realistic? This map lays out the salary you’d need to buy a home in 50 different U.S. metro areas.
This is the Salary You Need to Buy a Home in 50 U.S. Cities
Depending on where you live, owning a home may seem like a far off dream or it could be fairly realistic. In New York City, for example, a person needs to be making at least six figures to buy a home, but in Cleveland you could do it with just over $45,000 a year.
This visual, using data from Home Sweet Home, maps out the annual salary you’d need for home ownership in 50 different U.S. cities.
Note: The map above refers to entire metro areas and uses Q1 2022 data on median home prices. The necessary salary was calculated by the source, looking at the base cost of principal, interest, property tax, and homeowner’s insurance.
Home Ownership Across the U.S.
San Jose is by far the most expensive city when it comes to purchasing a home. A person would need to earn over $330,000 annually to pay off the mortgage at a monthly rate of $7,718.
Here’s a closer look at the numbers:
|Rank||Metro Area||Median Home Price||Salary Needed|
|#7||New York City||$578,100||$129,459|
|#15||Salt Lake City||$556,900||$100,970|
Perhaps surprisingly, Boston residents need slightly higher earnings than New Yorkers to buy a home. The same is also true in Seattle and Los Angeles. Meanwhile, some of the cheapest cities to start buying up real estate in are Oklahoma City and Cleveland.
As of April, the rate of home ownership in the U.S. is 65%. This number represents the share of homes that are occupied by the owner, rather than rented out or vacant.
The American Dream Home
As of the time of this data (Q1 2022), the national yearly fixed mortgage rate sat at 4% and median home price at $368,200. This put the salary needed to buy a home at almost $76,000—the median national household income falls almost $9,000 below that.
But what kind of homes are people looking to purchase? Depending on where you live the type of home and square footage you can get will be very different.
In New York City, for example, there are fairly few stand-alone, single-family houses in the traditional sense—only around 4,000 are ever on the market. People in the Big Apple tend to buy condominiums or multi-family units.
Additionally, if you’re looking for luxury, not even seven figures will get you much in the big cities. In Miami, a million dollars will only buy you 833 square feet of prime real estate.
One thing is for sure: the typical American dream home of the big house with a yard and white picket fence is more attainable in smaller metro areas with ample suburbs.
Buying vs. Renting
The U.S. median household income is $67,500, meaning that today the typical family could only afford a home in about 15 of the 50 metro areas highlighted above, including New Orleans, Buffalo, and Indianapolis.
With the income gap widening in the U.S., the rental market remains a more attractive option for many, especially as prices are finally tapering off. The national median rent price was down nearly 3% from June to July for two-bedroom apartments.
At the end of the day, buying a home can be an important investment and may provide a sense of security, but it will be much easier to do in certain types of cities.
The World’s Largest Real Estate Investment Trusts (REITs)
Real estate investment trusts (REITS) are a simple alternative for investors looking to gain exposure to real estate.
The World’s Largest Real Estate Investment Trusts (REITs)
Real estate is widely regarded as an attractive asset class for investors.
This is because it offers several benefits like diversification (due to less correlation with stocks), monthly income, and protection from inflation. The latter is known as “inflation hedging”, and stems from real estate’s tendency to appreciate during periods of rising prices.
Affordability, of course, is a major barrier to investing in most real estate. Property markets around the world have reached bubble territory, making it incredibly difficult for people to get their foot in the door.
Thankfully, there are easier ways of gaining exposure. One of these is purchasing shares in a real estate investment trust (REIT), a type of company that owns and operates income-producing real estate, and is most often publicly-traded.
What Qualifies as REIT?
To qualify as a REIT in the U.S., a company must meet several criteria:
- Invest at least 75% of assets in real estate, cash , or U.S. Treasuries
- Derive at least 75% of gross income from rents, interest on mortgages, or real estate sales
- Pay at least 90% of taxable income in the form of shareholder dividends
- Be a taxable corporation
- Be managed by a board of directors or trustees
- Have at least 100 shareholders after one year of operations
- Have no more than half its shares held by five or fewer people
Investing in a REIT is similar to purchasing shares of any other publicly-traded company. There are also exchange-traded funds (ETFs) and mutual funds which may hold a basket of REITs. Lastly, note that some REITs are private, meaning they aren’t traded on stock exchanges.
The Top 10 by Market Cap
Here are the world’s 10 largest publicly-traded REITs, as of March 25, 2022.
|REIT||Market Cap||Dividend Yield||Property Type|
|Prologis (NYSE: PLD)||$116.4B||2.03%||Industrial|
|American Tower (NYSE: AMT)||$109.8B||2.38%||Communications|
|Crown Castle (NYSE: CCI||$76.8B||3.35%||Communications|
|Public Storage (NYSE: PSA)||$65.9B||2.14%||Self-storage|
|Equinix (NYSE: EQIX)||$64.4B||1.74%||Data centers|
|Simon Property Group (NYSE: SPG)||$48.9B||5.07%||Malls|
|Welltower (NYSE: WELL)||$43.0B||2.58%||Healthcare|
|Digital Realty (NYSE: DLR)||$40.1B||3.55%||Data centers|
|Realty Income (NYSE: O)||$40.1B||4.44%||Commercial|
|AvalonBay Communities (NYSE: AVB)||$34.6B||2.62%||Residential|
As shown above, REITs focus on different sectors of the market. Understanding their differences is an important step to consider before making an investment.
For example, Prologis manages the world’s largest portfolio of logistics real estate. This includes warehouses, distribution centers, and other supply chain facilities around the globe. It’s reasonable to assume that this REIT would benefit from further growth in ecommerce—more on this near the end.
Realty Income, on the other hand, owns a portfolio of over 11,100 commercial real estate properties in the U.S. and Europe. It rents these properties out to major brands like Walgreens and 7-Eleven, which together account for 8.1% of the REIT’s annual income.
More Than Just Buildings
Cell towers and data centers may not seem like “real estate”, but they are both critical pieces of modern infrastructure that take up land.
REITs that focus on these sectors include American Tower and Crown Castle, which own wireless communications assets in the U.S. and abroad. They are likely to benefit from the increased adoption of 5G networks and the Internet of Things (IoT).
On the other hand, Equinix and Digital Realty are focused on data centers, a fast growing industry that is benefitting from digitalization. Both of these REITs work with major tech firms such as Amazon and Google.
Trends to Watch
The demand for real estate can be heavily influenced by overarching trends found around the world. One of these is population growth and urbanization, which has drastically pushed up the cost of housing in many cities around the world.
There’s also the rising prevalence of ecommerce, which has triggered a boom in demand for warehouse space. This is best captured by Amazon’s massive growth during the COVID-19 pandemic, during which the company doubled the number of its warehouse facilities.
Globally, ecommerce accounts for just 19.6% of total retail sales. Should that figure continue to rise, industrial real estate prices could be in store for robust, long-term growth.
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