ST. LOUIS–House prices across the U.S. have soared 162% since 2000, while income has increased only 78%, according to a new analysis.
“The American Dream of homeownership is becoming even less attainable as home prices have risen exponentially faster than income over the past two decades,” noted Homebay.com in its new report. “Despite the housing market crash in 2008, the median U.S. home price climbed 162% between 2000 and 2022 — the last full year for which housing and income data is available. Low interest rates and limited housing stock helped fuel the market’s recovery and pushed home prices higher, but wages failed to keep pace.”
Not Even Close
According to Homebay.com, to afford the median-priced home of $433,100, Americans need an annual income of roughly $166,600. But the median household earns just $74,580 — only 45% of the recommended amount. It noted.
Its analysis is based on publicly available data from the Federal Reserve, the National Association of Realtors, and the U.S. Census.
“We found that the divide between home prices and income has caused the house-price-to-income ratio to greatly exceed what many financial experts consider healthy,” Homebay.com stated. “The average house-price-to-income ratio has climbed to 5.8 nationwide — more than double the recommended ratio of 2.6. In other words, buying a home should cost about 2.6x what the average American makes in a year. In reality, it costs 5.8x the median household income — making homeownership an increasingly elusive dream for today’s home buyers.”
Additional Findings
The analysis found that if home prices had grown at the same rate as income since 2000, the median U.S. home would cost nearly $294,000 — about 32% less than today’s price of $433,100.
According to Homebay.com, none of the 50 most-populous metros in the U.S. have a home-price-to-income ratio that’s equal to or below the recommended 2.6.
Pittsburgh has the lowest home-price-to-income ratio at 3.2, followed by Buffalo (3.5) and Cleveland (3.5).
Least Affordable Areas
The least affordable metros for housing are unsurprisingly concentrated in California: San Jose (12.1), San Francisco (10.4), San Diego (9.5), and Los Angeles (9).
The analysis also reminded that as wages fall behind rapidly rising home prices, Americans view the housing market with increasing hopelessness. Nearly 3 in 4 renters (72%) say they’ll never have enough money to own a home.
The analysis can be found here.
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