US Homes Have Never Been More Unaffordable

Tyler Durden's picture

Just under a year ago, US home prices finally surpassed their prior all time highs, one decade after the 2006 bubble...

... and haven't looked back since. Which, all else equal, would be great news for America, where the bulk of middle-class wealth is not in the stock market contrary to conventional wisdom, but in its biggest, and most illiquid asset-cum-investment: one's home.

There is just one problem: while house prices are once again hitting new all time highs every month, household incomes have failed to keep up; in fact, as the Political Calculations blog shows, in the past two years there has been a distinct trend in home affordability, or lack thereof.

As the first chart below shows, starting in September 2015, the TTM average median new home sale price in the U.S. has been rising at an average rate of $906 per month.

That's the good news; the bad news is that in terms of affordability, the ratio of the trailing twelve month averages of median new home sale prices to median household income in the U.S. has risen to an all time high of 5.454, which following revisions in the data for new home sale prices, was recorded in July 2017. The initial value for September 2017 is 5.437.

In other words, the median new home in the US has never been more unaffordable in terms of current income.

One final way to visualizie it comes from Ironman's next chart, which shows the long-term relationship between median new home sale prices and median household income, with the annual data now spanning 2000 through 2016 and the monthly data covering the period from December 2000 through September 2017. It confirms the above: for the average American, buying a new home has never been more unaffordable.

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AtATrESICI's picture

No shit... Print more 0s and 1s that will help???? The prices to the moon...

a Smudge by any other name's picture

Here in greater Phoenix it's still pretty easy for me to rent a house I can afford. But my small business? Oh crap. I need about 1500 feet with a two bay garage minimally.

And part of the expense is locating it where I won't get robbed as fast.

I so want to be part of the hole tinyhouse, earthship, sneaky-cool projects but the business keeps me kinda locked into...stuff and things.

cheka's picture

tiny houses look a lot like slave quarters

drink it up goy

ZIRPdiggler's picture

The Luciferians try to sell the idea, via TLC on cable, that it is somehow cool to live in a tiny house: get people used to living in 100sq ft closets, in their lock-down, surveilled, smart-city prisons.

HamFistedIdiot's picture

+1 for any reference to Lucifer. Remember that in HRC's emails she was referred to as  "High Priestess".... yes, but serving whom?

Scrot's picture

Exactly, the same ones who want a borderless world are the ones pushing the tiny house bullsh*t.

Endgame Napoleon's picture

Well, maybe, that person is not the childbearing-age son or daughter of a dual, high-earning couple. The two-high-earner couple phenomenon has greatly reduced the size of the middle class, concentrating the wealth from the few, decent-paying, salaried jobs in fewer households.

From what I have noticed, many high-earner couples provide their newly married kids who will soon be providing them with the legacy-on-Earth grandkids to show off on FB a downpayment on a house.

Then you have the other end of the housing market, which also revolves around pay-per-birth rewards for womb productivity, this time from Uncle Sam.

Single mommas get either free rent in Section 8 or reduced-cost rent in mixed-income (tax credit) apartments, whereby the developer gets a per-unit tax credit from government.

These apartment complexes are located in safe, nice areas of cities and are better than what most childless, single college grads can afford.

Additional, womb-productivity freebies include free EBT groceries at $450 per month on average, free electricity, monthly cash assistance and a child-tax-credit bonus check at tax time between $3,327 (1 kid) and $6,269 (3 or more kids).

If you lack the pay-per-birth benefits, good luck affording a one-room apartment that absorbs half or more of your pay, much less a house of any type.

yogibear's picture

The Wall Street boys need to push out 100 year loans. 

Infinite Federal Reserve priniting moves ahead.

cheka's picture

now add the taxes and insurance - also ripping higher

az_patriot's picture

They were saying this when I bought my first home in the early 90s.  I sold that one at a handsome profit, and bought another, which I sold for a smaller but decent profit (or at least recovered my investment and improvements).  Putting this article in the category of Doom Porn.

Mr. Apotheosis's picture

It's worse than it appears if you consider that they redesigned how they calculate median household income:

http://www.declineoftheempire.com/2016/09/deconstructing-median-income-b...

small axe's picture

I'd forgotten that particular deceitful makeover, thanks for the reminder, good article

Utopia Planitia's picture

My heart is warmed with your iron-clad guarantee that investment in real estate is guaranteed to return a handsome profit! BTFATH!!!

Pool Shark's picture

You are cherry picking dates.
If you bought in Southern California in 1988, after the correction in the early 90's, you were sitting on losses until the late 90's.
There are MANY markets which are still below their 2006/2007 highs.

Nevertheless, I have been pointing out for months what is shown in that chart above: The median home has NEVER been more expensive relative to the median income.

It may not come tomorrow, next month or even next year, but a housing correction is coming.

If you're sitting on a house with profits, it might be a good time to take your chips off the table and rent for awhile; especially if rents are soft in your area. Mrs. Shark and I just did.

The cure for high prices is... high prices

az_patriot's picture

We have one property we live in (which is totally paid for) and we will be in it until we croak.  Don't care about the value (although it's gone up in value).  We have one other property with a very small mortgage that we've been renting but will sell off next spring.  It will probably be sold at a small paper loss and a high dollar return, but without tax consequences.  

I don't disagree that home values are too high proportional to income, but it's been like this for decades.  In the 1960s my parents bought a single familiy home in a major metropolitan area for $20k, and they thought they would go broke buying it.  That home today is worth many times that.  My point is:  this is all relative.

Pool Shark's picture

Not so.

The median home price to median income ratio was very steady for nearly the entire 20th century, it has only gone up significantly the last couple decades and is currently at an all time high. (The ratio has DOUBLED since the 80's.)

When we enter the next recession, or, if Trump gets his SALT deduction elimination, and/or interest rates continue to rise, there will be a major correction in home prices...

scaleindependent's picture

"It has been like this for decades"

 

NO! The graphs show it is at all time high now. The ratio of real estate to income is AT ALL TIME HIGH> Jeez!

XBroker1's picture

And the ratio of real estate to gold means RE has never been more affordable. All depends on perspective and if one has invested in the right things along the way.

new game's picture

can't wait to pack all my shit and move to a rental. fuking lame ass idea. not to mention all the bullshit that goes with selling ones home. relocating is a bad idea no mater how one looks at it. moving is loosing- simple shit maynard.

my primary residence is not something that is bought and sold like an investment...

 

a Smudge by any other name's picture

Hey there AZ, Peoria. Nice scoop. Let's say you aren't the world's worst gloom and doomer and you put it to work.

Not for nothing: who is Ernest Hancock? Don't tell me when you find out. See you for breakfast.

Aireannpure's picture

Come on property owners have to pay all these government pensions someway.  Let these people try and find a job in the private sector that pays the same with benifits.

Number 9's picture

all you have to do is move to where everything just got destroyed..
shits cheap after a dindu remodel

cheka's picture

the mike brown/nyc skype operation likes this post - lots of msm articles about RE collapse in that hood after the production

Bigly's picture

Bullshit.

You can get a 2000-2250 sq ft home on a 1/2 acre around where I live for under 250000,  maybe under 230.  True, ppty tax will cost you 6-7.5.

If one wants a 'trendy' spot, then no. But who wants that besides cucks and SJWs?

NihilistZerO___'s picture

That's where the majority of jobs are. Unless you can work remotely or are a retiree, affordability in areas without good paying jobs is meaningless.

cheka's picture

why have multiple las vegas witnesses died recently

XBroker1's picture

Sounds like what my 2 sisters did. Both retired government workers. lol Suckers.

I pay 1200 a year in taxes on a new home same size as theirs only with 10 times as much land. Of course, if you've worked for the government your entire life, you don't really understand the value of a dollar.

DosZap's picture

Property tax of 6k-7.5k,and if the Mortgage interest deductions get LEFT out of the NEW GOP tax bill, the industry will be DOA.

New homes sales will really TANK.(for that matter even used homes)

EternalAnusocracy's picture

Mine has gone "up" around $250,000 in last five years.  I'm RICH!!  /s

(Too bad I can barely make the mortgage payment)

wisehiney's picture

Find a well built house from the past 150 years that you can restore without sick city neighbors.

To avoid the busy body inspectors, tax tax tax collectors and regulators with a small r.

Much better built are many of the older ones.

And they have feeling like nothing new.

Put in sweat. Patiently find tradesmen to help.

My houses have always paid me.

Like EVERYthing else.

You get out what you put in.

Your time is the treasure.

Coming and going.

Berspankme's picture

The killer here is property taxes. Motherfuckers getting 3% now. $250k house is 7500 in taxes. 600 a month just for tax to feed .gov trolls

cheka's picture

ah,  a fellow texan.  and you get fcked by nyc.irs.dc because those taxes aren't as deductible as the state income taxes of the communist states (that have lower property taxes)

Drop-Hammer's picture

Don't do it man.  Get out and stay the f*ck out of jew debt.

Nature_Boy_Wooooo's picture

Seems to be some correlation between overinflated property values and overpopulation due to mass immigration. Gonna be a lot of butt hurt home owners when we build that Wall.

cheka's picture

not at all.  texas still cheap relative to other coasts -- and FULL of immigrants

Pool Shark's picture

If Trump takes away your 3% property tax deduction, it's gonna get more expensive...

scaleindependent's picture

You know Trump's puppet masters, Cohn and Mnuchin are biting at the bit. Anything to transfer the cost of running the state to the muppets.

cheka's picture

property tax deduction isn't big enough for most people to use -- we get stuck with the standard deduction as best option - the pt deduction is a mirage

YUGE advantage to the state income tax states over the high property tax states

skyped like everything else

Expat's picture

There seems to be some correlation between low intelligence and racist xenophobia. Gonna be a lot of hurt butts if you assholes ever learn math and writing and somehow learn some truth.

homiegot's picture

I'm sure you have several living with you.

buffalolips's picture

Expat, that was some of the most unintelligent commentary I've read in a long time. No doubt someone else's fault, right?

ZIRPdiggler's picture

I heard recently about a burned-out, gutted house in San Fran going for $800,000.  Boy, what a steal.  Jump on that one.

scaleindependent's picture

Imagine, just imagine what would happen to the economy if you add a modest increase in the price of oil to the massive increases in housing, health care, college, books, food.

 

hmm...

IridiumRebel's picture

I’m even. I’ve sold two houses this year. One I made a killing on and the other we lost on. I’m free. Let it burn.

uhland62's picture

Congratulations you have caught the zeitgeist. Everybody is supposed to be a possessionless little slave. 

IridiumRebel's picture

I still own a house in South Carolina on 71 miles of shoreline and enough to last us in our community for a solid year. Neighbors and I have an association and understanding. A few are electrical engineers. I own the community vehicle(emp proof and runs on veggie oil I make).

No one is ever truly prepared, but I’d say we are about as good as it gets.
Did I mention my wife who graduated from Columbia Med?

Yeah.

Scornd's picture

you dont own your home. if u did you couldnt be told to get x permit and pay x taxes.