Home prices in the USA have increased from $25,800 in 1971 to $419,200 in 2024. Over this same period of time household income has also increased but at a much slower rate. For this reason when looking at historical home affordability a common ratio is the home price to income ratio. This ratio allows us to see trends in home affordability.
One crutial aspect that the home price to income ratio forgets is the impact that mortgage rates play on the affordability of a home. For this we can take the cost of a mortgage payment throughout the years and compare it to the household income at the time. Comparing mortgage payment allows us to consider the impact of both increasing home price and mortgage rates in comparision to household income.
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