Home Buyer's Dilemma Explained in One Picture

If you do not already own a home it's getting harder and harder to buy one. Meanwhile, rent outstrips wage growth.

I got the idea for the above graph from a similar idea by Sven Henrich.

In my chart, I indexed all the values to 1982.

Key Ideas

  • Those who seek to buy their first home will have a very difficult time finding one that is affordable.
  • There was a small window of buying opportunity from 2009 to 2011 but that window has since been closed.
  • Making matters worse, rent prices accelerated in 2011 and far outstrip wage growth.

Median vs Average Wages

It's important to note that hourly wages are averages. The median wage earner is even worse off.

​The latest median wage data is from May of 2016. It shows real median wages decline in seven out of the last 11 years.

Mike "Mish" Shedlock

Comments (13)
No. 1-13
KidHorn
KidHorn

Glad I bought my house in 1994. We had a choice of maybe 50 similar homes in our price range. Houses would frequently sit for 6 months or longer before being sold.

Runner Dan
Runner Dan

“Those who seek to buy their first home will have a very difficult time finding one that is affordable.”…which is fine since if no one can afford to buy a home, sellers will need to lower their price – that’s how markets work if allowed. The problem occurs when the government steps into the market in multiple ways to “make it affordable”. For example, did the multimillionaire Hannity really use HUD financing to purchase real estate? Why is the government backing the majority of loans originating today?

Trump’s partial elimination of the mortgage-interest deduction tax break and his increasing of the standard deduction are small, but important steps toward leveling the playing field.

Bam_Man
Bam_Man

Joe 6-Pack has his "balls in a vise" when it comes to housing, healthcare and higher education.

DFWRealEstate
DFWRealEstate

It's a utopia that only a central banker would love. Excellent chart by the way.

killben
killben

Mish, Does the deviation in median home prices start in 1987? From the chart it appears the deviation is fully the effect of the Fed's (and other CBs) meddling with interest rates (and QE). Probably it has gone up and away after Draghi 's 'whatever it takes' . Looks like any time at moves to the trend line, the CBs just pull it away with asset inflation.