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Because of lack of data, we used median family income as a measure of income for 1960 instead of median household income. Nationwide rents have increased at twice the rate of household incomes since 1960, making saving for a down payment increasingly difficult. Oregon's homeownership rate, at 64.3%, is slightly lower than the national average. Home sizes are also slightly below average, with a typical unit measuring 1,780 square feet.
In 2017, the price-to-income ratio was 2.8 for St. Louis, and 2.7 for Des Moines and Cincinnati, inline with other healthy housing markets. The good news is even with this increasing discrepancy between the growth rates over the last years, in 2017 the price-to-income ratios were 3.2, 3.0, 2.9 and 2.8 for Charlotte, Birmingham, Columbia, and Oklahoma City, respectively. These values are not much higher than the healthy housing market average of 2.6. However, this decrease over the last few years does not seem to be the trend in all coastal metros. In Boston, home prices increased by 24% between 2010 and 2017, after dropping by 25% during the financial crisis, and median home prices increased 228% since 1960. However, the growth rate of home prices is 4.2 times more than the growth rate of household income, making the Northeast the second least affordable region.
House Prices vs. Average Income (UK)
For metropolitan level, median household income values from 1960 to 2000 are from the Decennial Census. In the 1960s, owning a house was affordable in the Northeast, with a price-to-income of 2.1. However, home values started to outscale household income in the 1980s, with a price-to-income ratio of 3.7 by 1990. The price-to-income ratio reached its peak around the 2008 financial crisis with 4.6 and dropped to 4.0 in 2017. Home prices in the South were consistent with household income increases until the 2000s when the market became unstable. Average annual real wages steadily rose until 2014 but have since remained stagnant.
The data from New York City confirmed the overall trend observed in the Northeast. By 2017, the price-to-income ratio was 5.8 in New York City and median home prices increased by 184% since the 1960s, compared to a 54% increase in median household income. Although these statistics reveal that New York City is a cost-burdened metro area to purchase a house, the housing values between 2010 and 2017 suggests a potentially more optimistic housing market for the future. Home prices continued to decrease by 24% between 2010 and 2017, whereas household income increased by 12%, reducing the growth rate gap between home prices and household income. However, the costs of homeownership in the United States can be startling. According to Federal Reserve Economic Data, the median price of houses sold in 2022 is $428,700.
S&P/Case-Shiller U.S. National Home Price Index / Median Household Income in the United States
Although price-to-income ratios were not as high for the two new tech hubs, Seattle and Denver, they either doubled or almost doubled the healthy average of 2.6. In 2017, the price-to-income ratio was 5.4 for Seattle and 5.1 for Denver. The huge difference in growth rate appears to be driven by coastal metropolitan areas and new hubs such as Denver. To investigate this possibility, we looked at San Francisco, CA, Los Angeles, CA, Seattle, WA, and Denver, CO.
As high as they are today, price-to-income ratios are still below the all-time highs seen during last decade’s housing boom . In fact, price-to-income ratios nationally were remarkably stable between 1980 and 1999, when they fluctuated between 3.1 and 3.4. But in the early 2000s, home price growth far surpassed income growth for six years. As a result, in 2005, the national price-to-income ratio rose to 4.7, the highest it has been since at least 1980. For many Americans, homeownership is completely out of reach, with sky-high rents making it impossible to save for a large down payment. The good news is that there are still many inland cities where homeownership is affordable.
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While home values have been on the rise for the past year — in some areas appreciating by 15 percent or more annually — median wages haven’t kept pace. As a result, home price-to-income ratios in many areas are climbing. Oakland and Los Angeles ($221,592, up 40.7%) round out the top five. During the 1980s, St. Louis and Des Moines household incomes were actually growing faster than home prices.
To investigate whether the observed discrepancy increase between growth rates holds true for some metropolitan areas, we looked at Charlotte, NC, Columbia, SC, and Oklahoma City, OK. From 1960 to 2000, price-to-income ratios were around 2.6, making homeownership attainable during these years. Home prices jumped during the 2000s and kept steam through the housing crisis. Overall, the inland metros represent more affordable conditions and even for the major coastal metros like New York City, there might be hope. In 2000, the average home value was $271,707 in the 50 most populated cities. By the 2008 housing crisis, average home values had jumped to $304,589 — a 24% increase.
Only 16 out of the 100 most populated cities in the United States are below a 2.6 price-to-income ratio in 2019. Whether it's a house with a white picket fence in the suburbs or a high-rise apartment in the heart of a vibrant city, owning property is considered part of the “American Dream” by the vast majority of Americans. However, for many Americans, that dream has become a nightmare because of ever-increasing home prices and stagnant wages. Clever’s Concierge Team can help you compare local agents and negotiate better rates. To use individual functions (e.g., mark statistics as favourites, set statistic alerts) please log in with your personal account.
These exorbitant home prices also mean monthly mortgage payments place a major financial strain on homeowners, even if they manage to save enough to purchase a home. The affordability index measures the percentage of a homeowner's monthly income devoted to housing payments. In the pre-bubble period from 1985 through 1999, homeowners spent 19.9 percent of their monthly income on mortgage payments. Low interest rates have translated into more purchasing power for homeowners, as the cost to finance homes has gone down. The house-price-to-income ratio in the Netherlands was equal to 151.7 percent in the second quarter of 2022, making it one of the countries worldwide, where house prices have risen the most in comparison to income in recent years.
This means the median family can only afford a mortgage of around $250,000 and may find themselves being priced out of owning a home. In 1960, the price-to-income ratio for Western states was 2.1, but by 2017 it increased to 4.9. While median home prices increased by 195% in the West, median household income only increased by 26% since the 1960s. This means the growth rate of home prices is 7.5 times more than the growth rate of household income, making the Western region the least affordable region in the U.S. The average real estate commission fee in this areas ends up being substantially higher than any other regional housing market.
By the early 2000s, this pattern flipped, and home prices began to outscale household incomes. The discrepancy between income and home prices makes home buying still within reach in many major Midwestern metropolitan areas, making the Midwest the most affordable region to buy a home today. Although the growth rate difference between home prices and household income has accelerated in recent years, they are still lower than those observed in the Western and Northeastern regions. Now might be the time to buy for would-be homeowners living in the South, as home values steadily rise and price-to-income ratios remain reasonable. In 2000, the growth rate differences between home prices and household income were 17%, 13% and 23% for Charlotte, Columbia and Oklahoma City, respectively.
Homeowners in 24 of the 30 largest metros covered by Zillow were paying more for homes in the fourth quarter of 2012 relative to their region’s median income than they were from 1985 through 1999. Though residential property prices in the Netherlands have been on an upward trend since 2014, in August 2021, the annual house price appreciation reached the staggering 17.8 percent. In 2022 and 2023, the growth of house prices is forecasted to continue, albeit at a slower pace. Monthly median mortgage payments are calculated assuming the buyer made a 5% down payment, and take that month’s median sale price and average mortgage-interest rate into account. The average mortgage rate in October 2022 was 6.9%, while the average rate in October 2021 was 3.1%.
Nearly 90% of major metros have a house-price-to-income ratio that exceeds the maximum recommended ratio of 2.6. Zillow has noticed a trend that could become problematic for both the U.S. housing market and policymakers in coming months. As home prices appreciate, these loans will be paid off as borrowers are able to refinance. Prepayment burnout is probably baked in the cake already at these interest rate levels. However, investors in Ginnie Mae mortgage-backed securities are at risk of streamlined VA interest rate reduction refinances. Big agency REITs such as American Capital Agency , Annaly Capital Management , and MFA Financial invest in mortgage-backed securities that the government guarantees.
Home prices in the West are increasingly out of line with household income, while only 16 out of the 100 most populated areas in the U.S. are below the healthy 2.6 price-to-income ratio. Median gross rent increased by 72% since the 1960s, more than twice the growth seen by adjusted incomes, making renting costlier than ever and saving for a future home difficult. The homeownership rate is also among the highest in the nation, at 74.8%. However, Mississippi also has the nation's highest poverty rate, with a fifth of its inhabitants living below the poverty line. To calculate house-price-to-income ratios for the 50 most populous U.S. metro areas, we used Zillow’s Home Value Index to estimate home values and estimated family income sourced from the Department of Housing and Urban Development. In the 10 most expensive cities, the average house-price-to-income ratio leapt to 6.9 in 2021 — a 61% increase since 2000.
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