What is Priced Out?

Priced out refers to an individual or group who is unable to invest in a particular market or purchase a particular product or service due to increases in the market value. When the cost of something becomes prohibitively high to a person, that person is said to have been priced out of the market.

When someone is priced out of a market, their choices are to simply remain out of the market, to wait for the market to become more affordable, to improve their own financial situation to the point where they can afford to buy, or, if possible, to consider a different market. For example, someone who was priced out of their neighborhood's real estate market could look at a different part of the city or even an entirely different city or state.

Key Takeaways

  • Being priced out of something means being unable to afford it as it becomes more expensive.
  • Being priced out is most commonly associated with real estate markets, but it applies to any good or service that is becoming increasingly expensive.
  • People who are priced out of local real estate markets often end up as permanent renters or go elsewhere to purchase a home.

Understanding Priced Out

Being priced out of the market simply means that it has become too expensive for you. Although the term is most closely associated with real estate, this can occur with practically any good. As the price on a particular good rises, if incomes do not rise in conjunction, then a portion of people will be priced out of the market for that item. They may be forced to switch to an item at a lower price which may not have all of the features of the item they used to be able to purchase.

For example, as new features have pushed smartphones to the $1,000 mark, many consumers have been priced out of owning the latest models. This is particularly true when smartphone makers look to enter markets where $1,000 USD is a considerable sum. To avoid pricing out international customers, smartphone makers have tried offering stripped down versions or partnering with carriers to provide significant upfront discounts with long-term contracts.

Priced Out of Real Estate Markets

As mentioned, being priced out is commonly used to refer to the real estate market. For example, people in cities with extremely high average home prices, such as Newport Beach, California, would be said to be priced out of the market if they could not afford even an entry-level home. In markets where people have been priced out, these people may become permanent renters or simply move on. Being priced out of real estate can be due to a single factor, such as depressed wage growth.

However, it is more often a combination of factors such as slow wage growth and the influx of real estate investment dollars from elsewhere leading to the gentrification of a previously affordable area.

Being priced out in real estate becomes a serious demographic issue for areas as it is often young families that get priced out first due to the general lack of disposable income compared to other demographics. The options available to someone who is priced out of a real estate market would include buying in a different area, waiting for the supply of housing to increase enough to lower housing prices or getting a higher-paying job that would allow them to afford a property.