Over the past 30 years, DC home prices have increased to move the metro area into the top 20 most expensive housing markets in the country, according to new data released yesterday from online research portal Trulia. The DC metro area landed in the 16th position in the top 20 most expensive metros, after failing to break into the top 20 in 1986.
The study, which compared median home prices in the 100 largest US metros in 1986 to present day prices, found that home prices have increased at a quicker pace over the last 30 years in the 20 most expensive metros than in the least expensive.
This would seem to suggest that economic convergence — less expensive markets catching up to the more expensive ones — is not happening, says Trulia.
In 1986, the average price of a home in the most expensive metros was $127,058, which was 144 percent more expensive than the average price in the least expensive, $52,022. A DC metro area home had a median price of $92,611 in 1986, when it ranked as the 21st most expensive metro.
The average price in 2016 rose to $493,504 in the most expensive metros — now 319 percent more expensive than the average price in the least expensive metros, $117,827. With a median home price of $359,510, the DC metro area currently ranks as the 16th most expensive metro in Trulia’s study.
The data indicates that long-term homeowners in the expensive metros have seen much greater returns on their investments. San Francisco homebuyers have seen a nearly 560 percent return, or $897,520, compared to homebuyers in Rochester, New York who only saw an 85 percent return, or $58,281.
San Francisco’s home price appreciation has in fact outpaced the 10 metros with the smallest returns combined, where the combined gains were $630,242.
The cycle of wealth accumulation in these more expensive metros is likely to continue says Trulia, since wealth is often passed down and inherited. As long as the most expensive and least expensive metros continue to diverge, it is likely geographical disparities will continue and the pricier metros will remain pricey.
Income growth and new construction strongly affected the 30-year change in home value according to Trulia’s data.
San Francisco, San Jose and Seattle have all had the largest income growth and are also metros that have experienced the highest growth in home prices. Smaller gains were seen in metros with low income growth.
Supply-induced home price appreciation, says Trulia, may have also affected prices in some metros.
You can read the entire Trulia study here.