- 19 Jul 2023 06:39
#15280251
Unaffordable home prices are a big issue in many parts of the U.S.
Some may wonder how this issue has changed over time. Is it more difficult for Americans to afford homes now than it was 40 or 50 years ago?
This graph helps to answer that question. It looks at the ratio of home price to median household income, over time, going back from about 1955 to March 2023.
Home Price to Income Ratio (US & UK) - 75 Year Chart | Longtermtrends
https://www.longtermtrends.net/home-pri ... ome-ratio/
The ratio has fluctuated between a low of around 3.75 in the late 1960s and most of the 1970s, to a high of 6.75 during the housing bubble, and as of May 2022 an unprecedented high of 7.6 .
The conventional wisdom was that a home was considered "affordable" if the cost was 4.5 to 5 times the household income.
(This might sound too easy but consider that this is before taxes, which can easily eat up 40% of that income, and then there are also living expenses, so not all of that income can be allocated towards paying for the home)
The median is a good representation of what the "typical" person is earning, because by definition, half of people are earning more than that amount and half are earning less.
This graph shows the change in housing affordability over time, relative to people's typical incomes.
From February 1961 to November 2000, the ratio never exceeded 4.65 . This is what might be considered a "good time" for Americans, in terms of housing affordability.
From March 1998 to January 2006 there was a large increase in home prices. This was part of the "housing bubble". When the bubble finally crashed, the ratio temporarily dipped below 5 but never reached as low as it had been before the before the start of the bubble.
If you live in the U.K., the page also has graph for the U.K. if you go further down.
In the U.K. the ratio was as low as 4.27 in December 1995, climbed to 8.67 during the height of the housing bubble in July 2007, and then leveled off around 7. The ratio is currently at about 9. Sounds like people are struggling with housing affordability.
Some may wonder how this issue has changed over time. Is it more difficult for Americans to afford homes now than it was 40 or 50 years ago?
This graph helps to answer that question. It looks at the ratio of home price to median household income, over time, going back from about 1955 to March 2023.
Home Price to Income Ratio (US & UK) - 75 Year Chart | Longtermtrends
https://www.longtermtrends.net/home-pri ... ome-ratio/
The ratio has fluctuated between a low of around 3.75 in the late 1960s and most of the 1970s, to a high of 6.75 during the housing bubble, and as of May 2022 an unprecedented high of 7.6 .
The conventional wisdom was that a home was considered "affordable" if the cost was 4.5 to 5 times the household income.
(This might sound too easy but consider that this is before taxes, which can easily eat up 40% of that income, and then there are also living expenses, so not all of that income can be allocated towards paying for the home)
The median is a good representation of what the "typical" person is earning, because by definition, half of people are earning more than that amount and half are earning less.
This graph shows the change in housing affordability over time, relative to people's typical incomes.
From February 1961 to November 2000, the ratio never exceeded 4.65 . This is what might be considered a "good time" for Americans, in terms of housing affordability.
From March 1998 to January 2006 there was a large increase in home prices. This was part of the "housing bubble". When the bubble finally crashed, the ratio temporarily dipped below 5 but never reached as low as it had been before the before the start of the bubble.
If you live in the U.K., the page also has graph for the U.K. if you go further down.
In the U.K. the ratio was as low as 4.27 in December 1995, climbed to 8.67 during the height of the housing bubble in July 2007, and then leveled off around 7. The ratio is currently at about 9. Sounds like people are struggling with housing affordability.
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