Cheapest Homes Gain Value Most in Red-Hot Housing Market
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Here's your Money Briefing for Thursday, May 13th. I'm J.R. Whalen for The Wall Street Journal. The red-hot housing market in the U.S. continues to push home prices higher, but it's not just the nicest properties whose values are surging, or even mid-range homes.
The part of the housing market that's really benefited the most is homes in that kind of lowest price tier. And these are homes often in cities that have low values to begin with for home prices.
The trend is helping jumpstart revitalization efforts in some cities. But is it all good for lower income homebuyers? It's not as clear cut as you might think. Our banking and consumer finance reporter Ben Ison explains after the break.
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What’s driving the surge in sale prices for the cheapest U.S. homes?
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The cheapest homes on the market in the U.S. are now the hottest. If you look at the properties valued below the national average, you see their sale prices are growing faster than any other segment. So what does this mean for lower income home buyers? Our banking and consumer finance reporter Ben Eisen has written about this and he's here to talk about it. Ben, thanks for being here.
Thanks for having me.
So Ben, you looked through some data on home prices and how they've changed over the past three years, and you found that homes with a median value of less than $100,000 have seen a roughly 40% price rise. Can you put this in context for us? What does this actually look like on the ground?
What we've seen is that this part of the housing market has been the biggest gainer when you think about the home price surge over the last few years. We think about the most recent kind of crazy housing market as rising for people who are looking to buy second homes or move to the suburbs or leave homes. big urban cities on the coast to move inland. But the part of the housing market that's really benefited the most is homes in that kind of lowest price tier. And these are homes often in cities that have low values to begin with for home prices, but also tend to be homes that need a lot of work or are in neighborhoods in need of revitalization. And that's where the big gains are.
Got it. So what areas of the country are benefiting the most from this?
So we focused on a couple of cities in particular, one being Youngstown, Ohio, another being Detroit, and also Cleveland. And these are cities where the average home value is pretty low, often in the tens of thousands of dollars. But really across the Midwest and the South, you have a lot of cities where the housing stock is old, some of the houses are dilapidated or vacant. And as a result, these are houses that can sell for a couple thousand dollars, $10,000, $20,000, and they probably need more money than that to get them habitable.
Okay, let's focus in on Detroit for a moment. You've done quite a bit of reporting about the housing market there and its struggles. How is the current housing boom playing out there?
So Detroit is a city with sort of a unique housing market. It has tons and tons of homes that are in disrepair or vacant, and thousands of them that are owned by the land bank, which is sort of a city-affiliated entity that is charged with managing and selling the properties.
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