U.S. Median House Prices vs. Income

As of 2023, an American household hoping to buy a median-priced home, needs to make at least $100,000 a year. In some cities, they need to make nearly 3–4x that amount.
The median household income in the country is currently well below that $100,000 threshold. To look at the trends between median incomes and median house prices through the years, we charted their movement using the following datasets data from the Federal Reserve:
  • Median household income (1984–2022).
  • Median Sales Price of Houses Sold (1963–2023).
Importantly this graphic does not make allowances for actual household disposable income, nor how monthly mortgage payments change depending on the interest rates at the time. Finally, both datasets are in current U.S. dollars, meaning they are not adjusted for inflation
It's worth noting that Air BnB has changed the value of homes. Obviously, that's more relevant in certain markets, but there are communities that are largely morphing into Air BnB's.
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All it takes is squatters to blow up this model
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It's worth noting that Air BnB has changed the value of homes.
Meaning homes are being bought up and hoarded to serve as rental properties, so if you want to buy a home to actually live in, the supply is decreased, and therefore prices go up? Or did you mean something else?
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I wouldn't say "hoarded" since they're actually being used, but yes that's what I'm talking about. The utility of homes has increased, because of a new use for them. That's a demand increase.
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Cool, makes sense. Thank you!
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By how much? 10 percent? 100 percent?
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In the aggregate, I have no idea. I'm sure someone's published something about it.
Anecdotally, the small town I'm from has skyrocketing real estate prices, because any available home gets converted into an Air BnB. I'd say it might be 100% above what it would otherwise be. Where I live now is almost certainly closer to 0% above what it would otherwise be.
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My point is the Airbnb factor is cyclical not permanent. I would never buy a place where Airbnb is prominent in the neighborhood
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There are too many nuances to draw any meaningful conclusions from this.
First, the definition of household income is poorly understood. People often hear household income and think "family income." these two thing are different, and family income is higher than household income. E.g., Take 2 people who need roommates because they can't afford to live on their own. Maybe they make 20k each in a metro area. The household income would be $40k. They would not be included in family income, however. Family income only looks at households occupied by a family. Families of size 4 have a median income > 100k, at least in 2022. Well, actually I don't know if that is true. I saw that 28 states have an median income for a family of 4 is >100k but I didn't pay attention to which states those included.
Second, median sales price of houses sold is biased as nicer houses are more likely to be sold. Especially when you consider new construction. This is demonstrated when you compare the zillow home value index with the median price of houses sold. The zillow home value index in in dec. 2022 was $333k. the median sales price of houses sold was $480k.
One could argue that the two measures in the figure are both biased so the comparison still holds. I would disagree as households, families, demographics, preferences, home features and lending regulations have drastically changed over time.
At least if it is being used in a way to argue that capitalism has failed or the american dream is dead.
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Thanks for clearing that up. It really helps.
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Here is a pic from fred showing the data. You can really see a large separation of home prices sold and the zillow index in 2009/2010
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Yeah, we live in a place where it's definitely more expensive than that, so we had to look outward until we hit a cheaper suburb; finally bought in 2022 right as interest rates were rising (but before they got usurious). We were forced to do it because our landlords were selling (and they wanted way more than the house was worth), and with what we had saved up, the mortgage/insurance/interest was barely more than rent. If it'd been six months later, we'd have been screwed because of the rates.
And god help anyone who doesn't get a fixed-rate mortgage.
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32 sats \ 1 reply \ @joda 1 Mar
Cities used to be charming because different architects could have different designs. Now not only will local boards not let you build what you want, they make it so expensive that it isn't even worth doing.
The only way homes are getting built is giant developers doing massive cookie cutter communities, approved by their golf buddies.
Literally, I asked the most successful developer I know what he does to succeed, and he said "shake lots of hands and play lots of golf".
Fucking dystopia.
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The people are the ones who foot the bill. Fu*****
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I guess this tiny little difference can be observed pretty much everywhere in the western world.
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I agree. Excluding the 2008-2012 crash, house prices have always been on the rise in all Western countries. Here in Portugal, the situation is very bad for the average citizen. In big cities, it is impossible to buy or rent.
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You have to look at this by state.
Outside of NY and California, home prices are fine
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That makes sense, and it happens in all countries. Prices are not homogeneous throughout the territory.
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And to bridge the gap we've normalised using an insane amount of leverage, like you wouldn't go 10x on asset as a rational person but on property its so normalised, and we memory hole those who get rekt on this trade and yes it is a trade.
Real estate can be a wealth destroying trade
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I would be interested in a similar graphic for the Canadian situation, which I expect to be worst.
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"nominal house price by nominal disposable income per head"
I'm not sure we can compare the two?
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The ratio measures the development of housing affordability and is calculated by dividing nominal house price by nominal disposable income per head, with 2015 set as a base year when the index amounted to 100. Canada's index score in the fourth quarter of 2023 amounted to 139, which means that house price growth has outpaced income growth by almost 40 percent since 2015.
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16 sats \ 0 replies \ @kr 1 Mar
great chart, thanks for sharing!
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Nice one!
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It's inflation
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