Comparison of car and house price trends over 5 years
(STACKER) – For many, the idea of buying a reliable vehicle that doesn’t break the bank may seem like a pipe dream. Prices have been rising steadily since 2017, and until automakers overcome supply chain and labor issues to pull more cars off the assembly line, pent-up consumer demand will only raise prices. With dealer inventory dwindling, car buyers have turned to used vehicles instead, creating fierce competition in the new and used car markets.
But it’s not just automobiles, the housing market has also seen a huge jump. In the second quarter of 2022, the median home sale price was $440,300, a 15% increase from the same period in 2021. Historically low interest rates and increased housing demand during the pandemic of COVID-19 have resulted in a shortage of homes for sale and record prices across the country. Although prices are still high, the number of home sales has declined since their pandemic peak: in July 2022, the number of home sales was down 20% from the previous year.
To look at the general trend in consumer car and home prices in the United States, Jerry compiled data from the Bureau of Labor Statistics and Realtor.com to understand how prices for two of the largest buying categories in consumption have changed over the past five years. Consumer price indices for new and used vehicles measure the price paid by urban consumers, who comprise about 88% of the total population. Changes in the index measure the rate of inflation between two periods.
House prices have skyrocketed over the past five years
Median home prices have steadily increased 54.6% over the past five years. Two years into the pandemic, buyers are facing a fierce market characterized by low inventory and declining housing affordability. In the past year alone, median home prices have risen nearly 20%.
2 / 6Place holder
New car prices have also risen, but not as dramatically
New car prices have been rising fairly steadily, rising 14.3% over the past five years. 2020 has been a worrying year for auto dealers due to a new wave of pandemic-induced economic uncertainty. Inflation coupled with chip shortages created a perfect storm for new car prices to rise dramatically.
3 / 6Place holder
Used car prices have risen faster
The economic headwinds of the pandemic have fully made their way to the used car market. Used car prices have increased by 47.0% since 2017 and, according to CNN, prices have increased by more than 30% between May 2020 and 2021. In addition, car rental companies have sold a third of their fleet due to the decline in tourism in 2020. With tourism now making a comeback, car rental companies are running out of cars and are not inclined to sell some of their limited inventory to wholesalers as they normally would . This caused used car prices to drop at first, but quickly increase to almost new car prices.
4 / 6Justin Sullivan // Getty Images
How COVID-19 has impacted demand for cars and homes
COVID-19 has left a significant economic impact and is causing many supply and demand issues. Pandemic shutdowns have slowed auto production. This has resulted in a shortage of used vehicle supplies, especially for newer models. The chip shortage has also spurred increased demand for used vehicles, leading to further price increases.
5 / 6 Canvas
Supply chain issues drive prices up even more
Despite the recent housing shortage, new home construction is on the rise. However, supply chain issues are further slowing things down. With material shortages and many back orders, new homes are taking longer to build. When the housing market becomes more abundant, house prices are more likely to stabilize.
6 / 6Justin Sullivan // Getty Images
Inflation makes cars and houses more expensive
Pandemic-induced inflation has pushed up house and car prices. This happens when the price of services and goods increases, which decreases the purchasing power of consumers.
In October 2021, the annual inflation rate jumped to 6.2% – the highest level in more than two decades, since November 1990 – and continued to rise. From July 2021 to July 2022, Americans saw the consumer price index increase overall by 8.5%. Meanwhile, starting in 2022, mortgage interest rates have risen, resulting in an average monthly payment for new mortgages increasing by about 50% compared to before the pandemic.
This article has been republished under a CC BY-NC 4.0 license.
Suggest a fix
Comments are closed.