OC/Excel
Note: This chart is based on FRED data (MSPUS and MEHOINUSA646N). It compares median sales prices of homes sold with median household income and does not adjust for mortgage rates or regional differences. Price-to-Income Ratio calculated by the author.
| Year | Median Household Income | Median House Price | Price-to-Income Ratio |
|---|---|---|---|
| 1985 | $23,620 | $82,800 | 3.5 |
| 1990 | $29,940 | $123,900 | 4.1 |
| 1995 | $34,080 | $130,000 | 3.8 |
| 2000 | $41,990 | $165,300 | 3.9 |
| 2005 | $46,330 | $232,500 | 5.0 |
| 2010 | $49,280 | $222,900 | 4.5 |
| 2015 | $56,520 | $289,200 | 5.1 |
| 2020 | $68,010 | $329,000 | 4.8 |
| 2025 | $83,730 | $423,100 | 4.8 |
Over the past 40 years, housing prices in the USA have outpaced wages, causing today's aspiring home buyers to feel that home buying is out of reach. In the early 1980s the price for a house was approximately 3.5 times the average yearly income. Today, houses in the USA cost five times or more than the average yearly income, with many larger metropolitan areas costing ten times or more than the average yearly income.
This issue hasn't developed evenly. At one point, housing prices were improving in the year 2000 and then sharply increased in the mid-2000s. In many areas where housing is in significant demand due to job density, housing stock is extremely lacking, combined with rapidly increasing land and construction costs, which drives prices even higher. Additionally, housing has increasingly become a vehicle for investment rather than simply a place to live, which has placed upward pressure on prices.
Due to all of these reasons, owning a home today has become increasingly difficult when compared to past generations, especially relative to current mortgage interest rates, and many people end up renting longer prior to being able to purchase a home.
Data Sources:
Federal Reserve Bank of St. Louis (FRED). (n.d.). Median sales price of houses sold for the United States [Data set]. Link
Federal Reserve Bank of St Louis (FRED). (n.d.). Median household income in the United States [Data set]. Link
