Housing affordability drops for a third straight year, now the most unaffordable on record in 2022, surpassing the 2021 record

 

Housing in America in 2021 has never been more unaffordable

Median household income in 2021 bought just 17.8% of the median sales price of houses sold.

 

Median household income now buys about 17% of the median sales price of a house, a new low: Joe Biden is the Barack Obama of unaffordable housing, only worse

 Housing affordability has never been so bad.

The median sales price in 1Q2022 climbed to $428,700.

Median household income in January 2022 is estimated at $74,099, which buys 17.3% of the median house sold in the United States.

Official annual figures through 2020 are indicated in this chart.

 

 

The on-going housing bubble

I checked the value of my home on Zillow today.

It's nuts.

After 13 years the estimated price is up 6.5% per annum.

On the other hand, the house I previously owned and sold is up only 0.8% per annum over the same period.

Two entirely different houses, two entirely different locations, two completely different histories. What seems like a bubble living in my current house wouldn't seem like one living in my old one.

The best way I've found to think about this is to ask, How much of a house will my income buy? For bubble purposes nationally, even though housing is a regional and local matter, use median household income and median sales price.

Here's the chart of that data as currently available.

In 2020 the Median Sales Price of Houses Sold for the United States (MSPUS) averaged a new high of almost $337k. We don't yet have the median household income figure for 2020, but it's likely to be bad news, skewing the graph lower again as less income buys a smaller share of increasingly expensive housing.

As you can plainly see, the trend for the percentage of a house purchased by an income has been all downhill since the end of Reagan Bull in 2000. The percentage really fell a lot during the housing bubble which peaked in 2005-06, helping precipitate GFC1. Incomes fell a lot after the Great Financial Crisis because people lost their jobs by the millions and never got them back and so less income purchased less house. Housing prices bottomed in 2012 and then rebounded slowly. Incomes did not, however, and what you made just kept buying less in the low range of 19%. 

That all sucked. Obama really sucked. Sucked historically bad. Record-setting bad. 

You'll notice things really improved in 2019, however. That's because median household income shot up $5k to over $68k (Trump tax cuts), and the median sales price of a house actually fell $5k to $320k. Your higher income bought more of a slightly cheaper house, not as much as the good old days, but more.

Unfortunately in 2020 median sales price shot up almost $17k while millions upon millions lost their jobs. The feds enacted foreclosure forbearance so that 2.3 million homes whose owners lost their jobs never came onto the market. But desperate people who wanted out of cities snarfed up inventory. Demand far exceeded supply, so prices went up. 

But even at 21.5% in 2019 housing was nowhere near affordable like it was from 1987-2001. It was a nice, hopeful moment, while it lasted.

I'm guessing it's going to be quite a while, though, before we ever see even that again. 

Median household income in New Hampshire is 8th highest in the nation, Bernie

The American Dream remains more expensive in 2018 than it was at the peak of the housing bubble in 2005

1H2018 uses Sentier Research July 2018 nominal median household income of $62,450/$320,800

Obama says America is great right now, on same day his own Census Bureau reports people are 6.5% poorer than in 2007

Obama here.

Marketwatch here:

"The Census Bureau reported that median household income was $53,657 in 2014. That’s less than the 2013 median of $54,462, but not statistically different. What is of significance is that, when adjusted for inflation, the median household generated 6.5% less than they did in 2007, the year before the recession."

11.2 million fewer people contribute to the economy today than in 2007

You'll have to do the math.

Rick Newman, here:

... there are still more than 16 million Americans who are unemployed or working less than they want because they can’t find a good full-time job. That’s 4.2 million more than in 2007.

Many others have dropped out of the labor force, which shows up in the numbers as a 3.3 percentage point drop in the participation rate since 2007. That might not seem like a big number, but it represents something like 7 million people who would be working or looking for work if they hadn’t dropped out. Combined with all the unemployed and underemployed, that’s a lot of people who are contributing less to the economy than they would have in a 2007 scenario.

The other big bummer is hourly wages, which have barely risen since 2007 when factoring in inflation. And that’s just for people with jobs. If you included people who used to have jobs but no longer do, the earnings number would be negative, which is why median household income is still far below where it was in 2007. That means people with jobs are barely staying even with inflation, on average, while the ranks of the economically distressed have swollen significantly.

The median priced existing home is affordable only to the highest reaches of the upper middle class

From an interesting discussion recently about what it means to be middle class, here:

One helpful yardstick to judge whether you're middle class: Median household income was $51,017 in 2012, according to the most recent U.S. census data. Robert Reich, a professor of Public Policy at the University of California-Berkeley and former Secretary of Labor, has suggested the middle class be defined as households making 50 percent higher and lower than the median, which would mean the average middle class annual income is $25,500 to $76,500.

If you're in the middle of the middle, however – not lower or upper-middle class – that would be an income range between $39,764 and $64,582, says Aaron Pacitti, an assistant professor of economics at Siena College in Loudonville, N.Y.

Again, it isn't official. Nobody gets a membership card to the middle class.

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The former spread, $25,500 to $76,500, comes to about 53 million individual wage earners in 2012 according to Social Security wage statistics, out of almost 154 million total. This spread looks like it comes from dividing the total workers into thirds and seeing where the income lines fall . . . in other words, not a wealth driven measure but grading on the population curve. This means a third of wage earners (about 50 million) make less than $25,500 and a third make more than $76,500.

The latter spread, between $39,764 and $64,582, comes to just 20 million individual wage earners in 2012.

Typically, working couples must combine such incomes to enjoy middle class life styles, which usually means homeownership.

Perhaps a better way to measure membership in the middle class is through housing affordability. Often housing is deemed affordable at about 2.6 times earnings on an historical basis, which implies an existing home price to the $39,764 earner at $103,400 or lower, and $167,900 or lower to the $64,582 earner.

Unfortunately the US existing home median sales price in March 2014 was $198,500, which presently requires an income of $76,300 to be affordable. In other words, you've got to have extreme upper middle class household income just to afford the median priced existing home.

But the median household income in 2012 was just $51,017. That only supported an affordable home at $132,600 or less, not much of a home.

Americans Still Earn Way Too Little To Afford The Median Priced Home

The national median price for an existing home in December 2013 was $196,300.

Median household income at the end of 2013 had reached $52,297.

That's a ratio of 3.75:1, which is even higher than the 3:1 ratio which prevailed a year ago, and 44% higher than the recommended ratio of 2.6:1.

Either housing is still much too high or wages are much too low to support ownership of the median priced home in the United States. It is more likely that both things are true.

And forget about buying a new house on such an income.

The median new house price reached a new record in December at $270,200, vaulting the ratio to 5.17:1.

Housing prices have continued to rise because of deliberate government policy to reinflate the housing bubble.

Sellers should sell and buyers should beware. 

"Academic inflation makes medical inflation look modest by comparison"

The greedy Marxists who outnumber conservatives on college faculties by three to one figured out long ago how to avoid the draft, subvert the values of America's children and future teachers of the young, and get rich doing it all at the same time.

It's been a veritable trinity of scams milked by the coward and follower classes: military conscription deferments for MA and PhD students, the tenure system which has permanently installed radicals nationwide, and now the most important, federally-backed student loans.

The Economist in September 2010 (link) noted the incredible disparity in the rates of college cost and income increases:

College fees have for decades risen faster than Americans’ ability to pay them. Median household income has grown by a factor of 6.5 in the past 40 years, but the cost of attending a state college has increased by a factor of 15 for in-state students and 24 for out-of-state students. The cost of attending a private college has increased by a factor of more than 13 (a year in the Ivy League will set you back $38,000, excluding bed and board). Academic inflation makes medical inflation look modest by comparison.

More recently Virginia Postrel thinks the reason costs have escalated is the federal student loan program itself, a veritable gravy train which guarantees rising costs for everything academic (link):


Any serious policy reform has to start by considering a heretical idea: Federal subsidies intended to make college more affordable may have encouraged rapidly rising tuitions. ...

If you offer people a subsidy to pursue some activity requiring an input that’s in more-or-less fixed supply, the price of that input goes up. Much of the value of the subsidy will go not to the intended recipients but to whoever owns the input. ...

[T]he number of slots at traditional colleges and universities is relatively fixed. A boost in student aid that increases demand is therefore likely to be reflected in prices rather than expanded enrollments. Over time, enrollments should rise, as they have in fact done. But many private schools in particular keep the size of their student bodies fairly stable to maintain their prestige or institutional character.