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Comparing 5-year car and house price trends

(Stalker) – For many, the thought of buying a reliable vehicle that won’t break the bank feels like a pipe dream. Prices have been rising steadily since 2017, and until automakers overcome supply chain and labor challenges to keep more cars off the assembly line, consumer demand will drive up prices. With dwindling dealership stock, car buyers have turned to pre-owned vehicles instead, creating fierce competition in the new and used car markets.

But it’s not just autos—the housing market has also seen a big jump. In the second quarter of 2022, the median home sales price was $440,300—a 15% increase from the same period in 2021. Historically low interest rates and increased demand for housing during the COVID-19 pandemic have led to a shortage of homes for sale—and record-high prices across the country. Although prices are still high, the number of home sales has cooled from their epidemic heights: in July 2022, the number of home sales decreased by 20% from the previous year.

To examine overall US consumer trends in car and home prices, Jerry collected data from the Bureau of Labor Statistics and Realtor.com to understand how prices for the two largest consumer buying categories have changed over the past five years. Consumer price indices for new and used vehicles measure the prices paid by urban consumers, which comprise about 88% of the total population. Changes in the index measure the rate of inflation between two periods.

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Home prices have skyrocketed over the past five years

Average home prices have increased steadily by 54.6% over the past five years. Two years into the pandemic, buyers face a cutthroat market filled with low inventory and reduced housing affordability. In the past year alone, average home prices have increased by nearly 20%.

New car prices have risen but not as significantly as the housing market.

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The price of new cars has also gone up, but not dramatically

New car prices have risen fairly steadily, up 14.3% over the past five years. 2020 will be the year for car dealerships due to a new wave of economic uncertainty caused by the pandemic. Inflation coupled with chip shortages have created the perfect storm for new car prices to rise dramatically.

Used car prices have risen rapidly over the past five years, at one point seeing the same price growth seen in the housing market.

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The prices of used cars have been increasing at a faster rate

The economic headwinds of the pandemic have completely given way to the used car market. Used car prices are up 47.0% since 2017, and prices are up more than 30% between May 2020 and 2021, according to CNN. Additionally, rental car companies will sell a third of their fleets in 2020 due to a decline in tourism. Now that tourism is making a comeback, rental car companies are running out of cars and are not inclined to sell any of their limited inventory to wholesale dealers as they usually do. This kept the prices of used cars low at first but quickly increased to roughly match new car prices.

An aerial view of brand-new Subaru cars in a half-empty warehouse at Auto Warehouse Co. in California in 2021.

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How COVID-19 has affected the demand for cars and houses

COVID-19 has left a significant economic impact and has led to many supply and demand issues. Pandemic disruptions slowed auto production. This resulted in a shortage of used vehicle supplies, especially for newer models. The chip shortage created a high demand for used vehicles, resulting in a surplus price increase.

New houses are under construction in the neighborhood.

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Supply chain issues drive up prices even further

Despite the recent housing shortage, new home construction has been increasing. However, supply chain issues are still slowing things down. With shortage of materials and lots of back orders, new houses are taking longer to build. When the housing market becomes more liberal, home prices become more stable.

A flyer is posted in front of the house for sale.

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Inflation makes cars and houses more expensive

Pandemic-induced inflation has driven up the prices of houses and cars. This happens when the prices of services and goods rise, which reduces the purchasing power of consumers.

In October 2021, the annual inflation rate rose to 6.2% – the highest level since November 1990 in more than two decades – and continued to rise. From July 2021 to July 2022, Americans saw an overall 8.5% increase in the Consumer Price Index. Meanwhile, starting in 2022, mortgage interest rates rose, resulting in the average monthly payment for new mortgages rising nearly 50% compared to the pandemic.

This article is re-published under the CC BY-NC 4.0 license.

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