WSJ Your Money Briefing - How One House in North Carolina Shows the Growing Cost Home Ownership

Episode Date: January 29, 2025

One house, three owners, 14 years. The cost of the same property in Chapel Hill, North Carolina has varied widely for the families who lived there. Wall Street Journal reporter Veronica Dagher joins host Ariana Aspuru to explore how this story illustrates the housing affordability issues facing the U.S. Plus, we’ll hear from the current owner about how the home’s value has doubled, despite no major improvements. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Here's your money briefing for Wednesday, January 29th. I'm Adriana Espudu for The Wall Street Journal. To understand the home affordability problems across the country, try looking at 1139 Great Ridge Parkway in Chapel Hill, North Carolina. I love this house. I had been looking in this neighborhood since they first started building it. That's Rachel Walker, and she currently owns the three-bedroom, forest green, Victorian-style

home in Chapel Hill. There's lots of bushes. There are woods behind us, so it's like a really pretty scene. When you walk in the front door you walk into really what we call our dining area and the floors here are beautiful. There's this natural wood and there's some wainscoting and the windows are really tall windows. Often in the summers we're on the deck a lot. Our cats come in and out, so they just have free rein.

The value of Rachel's home has increased more than $200,000 in the last five years without any major improvements. And now they're planning to sell it. It has been a huge surprise that our house's value is what it is today. We were sort of floored when we got our estimated value It's been a huge surprise that our house's value is what it is today. We were sort of floored when we got our estimated value and we were putting on the market. We did not expect that.

She says it's appreciated so much that purchasing it today would probably be out of the question. It would be a stretch. My husband would not be able to retire as expected. Wall Street Journal personal finance reporter Veronica Dagger says, This house tells a bigger story about the ballooning cost of home ownership. She joins me to talk about it after the break. Let's get started. Let's get started. Let's get started. Let's get started. Let's get started. Let's get started. Let's get started.

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Let's get started. Let's get started. Let's get started. Let's get started. Let's get started. Let's get started. faster with agents, winning with purpose, and showing the world what AI was meant to be. Let's create the agent-first future together. Head to salesforce.com slash careers to learn more. With rising prices, mortgages, taxes, and insurance, home affordability is becoming a bigger challenge for Americans. To know why, let's step back into that forest green home in Chapel Hill, North Carolina. Wall Street Journal personal finance reporter Veronica Dagger joins me. Veronica, you profiled this home, three-bedroom Victorian style, as a true example of the ballooning cost of owning a home. Why this house in particular? We wanted to find a house that was essentially a starter house in

kind of that median price range that Americans would be looking to buy if they were starting out. And we wanted to find a home that is on the market now because we wanted to get a sense of the current housing market. But we also wanted to find a home that has been sold multiple times in the past several years just to get a sense of how much past owners have seen home appreciate get a sense of their past mortgage rates and get a history of the housing market told through one house. And the home was built in 2010, purchased in 2011. How much did the first owners pay for it?

The first owners paid $250,000 cash. They had sold their prior home and were able to buy this in cash. And they had a property tax bill just under $2,000 at the time. And they enjoyed the home. They made it their own, but they were a retired couple. And so after a while, that third floor and also all the other steps and stairs in the in the house became an issue for them.

And so that's why they eventually decided to sell. They sold it for two hundred and seventy thousand dollars, and they sold that to an institutional buyer. One of the big institutional buyers is called Invitation Homes. And they also bought it for cash, essentially. And they rented the home out for about four or five years. I like how you described the home earlier as a microcosm of other homes that we're seeing in the country, because there was a real spike in price that came when the next owners bought it. What happened?

In 2020, the next owners bought it for about $315,000. And as you know, the housing market was really heating up even before the pandemic, and especially in that area of North Carolina. But nationally, once the pandemic hit, the housing market just accelerated. Mortgage rates dropped and they were already low, but they went even lower for some folks.

And the demand for housing just really accelerated. And as a result, homes like this one saw their value just skyrocket within a matter of four or five years. So this home that they bought for $315,000 for, I believe it was a 3.75% mortgage rate is now estimated to be worth about $520,000 or more, depending on who you ask. And so it's more than doubled in price from what the first owners bought it for. And that appreciation is just in a matter of several years. All the details about this North Carolina home really just illustrates the broader challenge of achieving homeownership. And you've written about this a lot in the past.

How much more do people have to afford now to get a starter home or an average home? Yeah, it's really hard. I mean, as Darryl Fairweather from Redfin, who's the chief economist, said, the bar just keeps getting higher and higher for what it takes to afford the typical. and higher for what it takes to afford the typical home. There's a stat that we found that in January 2012, the household income required to afford the typical home in the U.S. was $39,000 in change, and that's according to Redfin. As of November 2024, home buyers need to earn $126,000 in change to afford that same home, and that's a 223% increase. And so it's a really tricky situation for folks to have to make so much more money to afford a home these days.

Looking ahead, what are some indicators that homeowners or prospective buyers can keep their eye on to know when it could become more affordable to buy a home? Buyers and of course real estate agents alike are praying for lower mortgage rates. We don't know if that's gonna happen anytime soon. It doesn't look like it's headed in that direction. People are also looking for more houses

to be put on the market. Inventory has increased in the last couple of months, so that's a good thing. If you're looking to buy a house, maybe consider if you can, looking in areas of the country where maybe it's a bit more affordable. But if you're just hanging on and really have your heart set on a specific area,

I suppose it's just a matter of saving more if you can. Finding a house that works with your budget, if you have family resources and family can give you the money to help towards a down payment, that is a huge benefit that so many people have, but many, many people do not. So that's part of the game these days. A lot has changed because of this market, and I think people are thinking, like, do I have to buy a house? You may not have to buy a house. That's not necessarily part of the American dream anymore for a lot of people,

both out of financial necessity but also out of lifestyle necessity. That's WSJ Reporter Veronica Dagger. And that's it for your Money Briefing. This episode was produced by Jess Jupiter with supervising producer Melanie Roy. I'm Arianna Aspuru for The Wall Street Journal. Thanks for listening.