Home Prices Versus Family Incomes

Given rising interest rates, decelerating home price growth, and a steady but modest rise in the median income, National Association of Realtors research data specialist Michael Hyman examines how much of a person’s income now goes toward housing costs – and how that share has changed over the past 18 years.
As of the second quarter of 2018, family incomes have risen by 52% since 2000, according to the National Association of Realtors’ Family Income Index. Housing prices have risen by 95% over the same period, growing nearly twice as fast as incomes to almost double 2000 price levels.
In 2000, when interest rates were 7.90 percent, homeowners had to spend about 19.6 percent of their income to be able to afford a home… In the wake of the Great Recession in 2009-2010, mortgage rates started to fall, so the share of income that went to paying a mortgage declined.
Since that time rates have continued to decline, much to the benefit of potential homeowners… On a regional level, the West requires a higher portion of your income, which has eclipsed the 35 percent mark. The Midwest, being the most affordable region, requires the least percentage of median family incomes [at around 15%].

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