Average Cost of Homes in the U.S.
Welcome to The Average Cost of Things, where we help you put prices into perspective. In this article, you'll learn about the average cost of homes in the United States, as well as the factors that influence the cost of a house.
Before we start looking at numbers, we need to define a few terms. These are words you'll hear a lot as you continue to research the cost of homes, so you need to understand what they mean.
Average vs. Median Cost - What Does it All Mean?
Here are some basic definitions to help clear things up:
- Median home price -- This is the price of a house that falls in the middle (or median) of all homes sold. In other words, half of the homes in the area will sell for more than this amount, and half will sell for less. Most journalists and data compilers refer to the median price when issuing reports.
- Average home price -- This is when you add up all of the home prices in a given area (a city, state or the entire country) and then divide that total by the number of houses sold.
Both of the statistics above use the actual sale price of a home. They do not use the seller's asking price, because these numbers are not relevant or useful. The only thing that matters is what the home actually sold for, and that is what determines both the median and average cost of properties in a given area.
The challenge is that some data sources provide one or the other, while other sources provide both numbers. It would be nice if publishers could use one standard across the board, but that's not going to happen. So in this article, we will simply label everything with average or median.
Average Price Data, 2006 - 2009
Here are some historical figures from the Census Bureau, showing the average sale price of homes sold in the U.S.
- 2006 - $305,900
- 2007 - $313,600
- 2008 - $292,600
- 2009 - Not yet available
Let me put these numbers in perspective. If you look at the average sale prices dating back to 1963, you will notice that the price almost always rises from one year to the next. It's usually a very gradual rise, too. But starting in the late 1990s, average home costs / prices began to rise at a quicker pace, and then they dropped in 2007 -- and plummeted in 2008 - 2009. This is a classic pattern of real estate bubbles. But this time, the bubble imploded like it has not done in decades. You remember the housing market crash, mortgage crisis and economic recession, don't you? This is why home prices are much lower today (in many cities) than they were just a few years ago. Good news for home buyers, bad news for homeowners.
Median Price Data, 2006 - 2009
Here is another data set. These numbers come from the Realtor.org website, and they show median sales prices for homes sold in the United States.
- 2006 - $221,900
- 2007 - $217,900
- 2008 - $196,600
- 2009 (Q1) - $167,300
- 2009 (Q2) - $174,200
- 2009 (Q3) - $177,900
This is different data collected by a different organization, but you can still see how the average cost of homes has dropped significantly from 2008 - 2009. You can also see that the prices have been rising gradually throughout 2009 (over the first three quarters). Many experts cite this as a sign of economic recovery.
How to Research Housing Costs in Your Area
If you want to know what homes are selling for in your neighborhood, or in the surrounding area, you can simply view sales prices online. There are several websites that track this kind of information. Sure, you could drive down to your county courthouse to research, but why waste the time? You can get the same data (although a bit less current) by using the Internet.
You can learn more about these websites from this related article:
The Price of Houses Recently Sold in My Area
States With the Highest and Lowest Cost of Homes
So which cities and states have the most expensive real estate markets? Southern California always tops this list. La Jolla, California was recently names the most expensive real estate market in the United States. In that city, the average cost of a home will run you more than $2 million. More than a dozen other cities in the Golden State showed up on the most expensive list.
As for the most affordable housing markets, you can think Midwest. Wichita, Akron and Detroit showed up on this list. According to a BusinessWeek article ("Where to Find America's Most Affordable Real Estate," September 2009), Kokomo, Indiana was the nation's most affordable metro area -- with a median price of $79,000.
To create this article on the average cost of homes in the United States, we visited dozens of articles and read various reports. The two sources cited in this article were: (1) "Median and Average Sales Prices of New Homes Sold in the United States," a report by the U.S. Census Bureau; and (2) data compiled by the National Association of Realtors®.
This information is all well and good. But if you're planning to buy a home in the near future, there's only one number that matters to you -- your budget. It's helpful to know the average price of houses in your area, but you should not let that control your spending. It's important to purchase a home within your means, based on a thorough review of your income and debt.
Here's an article that shows you how to do this:
How Much House Can I Afford to Buy?