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Illustration: Sarah Grillo/Axios

Middle-income housing across America — particularly in big coastal cities — is growing scarcer than ever, as the wealthy bid up properties that might once have been considered "affordable."

Why it matters: The pandemic's effects on the housing market may turn out to be permanent — and could widen the gap between rich and poor. Renters and buyers alike face rising prices that outstrip income growth and favor people with cash savings.

Driving the news: The median price of a single family home in California crossed the $700,000 mark this summer — a record — setting a new standard for what the American Dream might cost.

Housing experts say it's a trend that's accelerated over the last five months and tied directly to the pandemic: Low interest rates — which the Fed seems inclined to keep, thanks to coronavirus — are lulling people into the market at a time when everyone's craving more space to live and work.

  • "Starter" homes in cities that attract young people are almost nowhere to be found.
  • They're also growing harder to find in exurbs. People leaving San Francisco, where the median home price is $1.1 million, will still have to pay nearly $500,000 if they move to Sacramento.
  • "Affordability has been a challenge that predates this crisis, and it’s one that’s been accelerated by this crisis," Jordan Levine, deputy chief economist for the California Association of Realtors, tells Axios.
  • "It seems like finding a house is a bit like trying to buy the new PlayStation 5,” says Ryan Lundquist, a Sacramento home appraiser.

Nationally, the story is the same: The cost of buying a house was up 7% in September, the Case-Shiller index showed recently.

  • Phoenix, Seattle and San Diego were the cities with the biggest price leaps, Case-Shiller found.

How it works: The last five months have seen a real estate frenzy. Even as many Americans have struggled to pay rents and mortgages, the wealthy have paid above-asking prices for homes that used to be worth a lot less — leaving the low end of the market hollow.

  • From there, a chain reaction keeps low and middle-income people in rentals and leaves fewer financial incentives for developers to build anything but high-end homes.
  • "Supply appears to be the tightest for low and moderate cost homes," said Alexander Hermann of the Harvard Joint Center for Housing Studies, an author of a recent report on the current housing scene.

"It's not a California issue — it's a nationwide phenomenon," said Lawrence Yun, chief economist at the National Association of Realtors. "In terms of the relationship between people's incomes rising and home prices rising, we are at a historical lack of synchronicity."

What's next: The best solution will be to enact policies that encourage homebuilding, policy experts said. Since mortgage rates are likely to remain at historic lows — continuing to encourage home sales — the easiest fix may be to build our way out.

  • Single-family housing starts have remained stubbornly under 1 million for over a decade, but there's hope they will rise in 2021, given the obvious demand.
  • "The only way to fix a deficit of supply is to build more homes, and to make it cheaper to build new housing," says Jenny Schuetz of the Brookings Institution, who wrote a report on housing stress on the middle class.


Go deeper

Updated Jan 28, 2021 - Health

New York AG: State severely undercounted COVID nursing home deaths

Gov. Andrew Cuomo. Photo: Lev Radin/Pacific Press/LightRocket via Getty Images

Data from New York's public health department undercounted COVID-19-related deaths in nursing homes by as much as 50%, according to a report released Thursday by state Attorney General Letitia James.

The big picture: Gov. Andrew Cuomo's administration had not been including nursing home patients who died after being transferred to the hospital in its tally of over 8,500 nursing home deaths. Data provided to the attorney general's office from 62 nursing homes "shows a significantly higher number of resident COVID-19 deaths can be identified than is reflected" in the official count.

Updated 7 mins ago - Energy & Environment

Thousands without power as "hazardous" winter storm lashes East Coast

Satellite imagery of the Northeastern U.S. taken by NOAA on Jan. 17. Photo: NOAA

A major winter storm lashed much of the East Coast Sunday and Monday, causing widespread power outages and disrupting travel over the holiday weekend.

The latest: Authorities in North Carolina confirmed that two people died in a car crash and that they responded 600 vehicle accidents during the storm on Sunday, per the Washington Post.

2 hours ago - Health

CDC director says COVID-19 messaging should have been clearer

Rochelle Walensky. Photo: Stefani Reynolds-Pool/Getty Images

Rochelle Walensky, director of the Centers for Disease Control and Prevention, said in an interview with the Wall Street Journal that the messaging around the COVID-19 pandemic and changing guidance should have been clearer.

State of play: Walensky is being coached by media experts and is planning to have more press briefings by herself in order to ensure that CDC is seen as an independent, scientific entity, rather than as a political one, the Journal reports.