The problem isn't so much that housing has gotten expensive. It's that many of the existing places have moved up-market compared to what they were 30-40 years ago. 75 years ago, Scarsdale NY or parts of Long Island were expensive. But Palo Alto was a drab middle class suburb. As the tech economy has boomed, that has driven prices up in Palo Alto for the same reason they were already high in Scarsdale. And now you have to move to Gilroy.
That's a misleading metric for two reasons. First, "people" includes all the people who bought a house decades ago before the prices went up, and correspondingly paid the old prices instead of the current prices. And second, it assumes that if housing becomes more expensive what people all do is pay more for housing rather than being unable to afford it and then having to take a longer commute to access housing they can afford, live with their parents, become homeless, etc., which negatively impact the amount or type of housing they get instead of the amount they pay for it.
Meanwhile between 1984 and today median income increased by ~290% while median new home prices increased by ~425%:
https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MEHOINUSA646N
And that's with the gap having reduced a bit in the last couple of years, since home prices have declined slightly since the peak in 2022 while median income continued its usual trend.
> Meanwhile between 1984 and today median income increased by ~290% while median new home prices increased by ~425%
The average FHA mortgage rate in 1984 was 13.2%. Today’s it’s 6.8%. The more expensive house with a cheaper mortgage costs $482 per month less and $173,000 less over the lifetime of the loan.
Both inflation and wages have not gone up uniformly since they started being tracked. We all know the Trump/Biden covid inflation was bad, but by the end of Biden's term wages had mostly caught back up. The second Trump administration's policies reversed that trend.
Housing in particular cratered in some areas during the GFC, but then went wild especially around the covid.
People are moving out of opportunity zones (and you know…losing opportunity) or moving in with roommates to keep the average percentage low.
Feels like such a basic factor to miss for what is supposedly an economists blog. That metric means nothing.
From https://www.jchs.harvard.edu/blog/rental-housing-unaffordabi...
> The net effect of this longer history is that renters today spend much more of their incomes on rent than they did in previous generations. The median renter household in 1960 spent less than a fifth of their income on rent. By 2022, housing costs consumed 31 percent of the median renter’s income. And in inflation-adjusted terms, the median rent is up 75 percent over these six decades while the median renter income has risen by just under 15 percent.
Even when I was a kid in the 1980s I didn't know a single person whose household had multiple bathrooms, a dishwasher, or air conditioning. Not a single one.
Part of the reason why standards have increased is because incomes have increased.