Monday, July 15, 2019

House Prices and Median Household Income

by Calculated Risk on 7/15/2019 05:17:00 PM

One of the metrics we'd like to follow is a ratio of house prices to incomes. Unfortunately most income data is released with a significantly lag, and there are always questions about which income data to use (the average total income is skewed by the income of a few people).

And for key measures of house prices - like Case-Shiller - we have indexes, not actually prices.

But we can construct a ratio of the house price indexes to some measure of income.

Last week I posted House Prices to National Average Wage Index. I mentioned another measure - house prices to the Median Household income.

This graph uses an annual average of the Case-Shiller house price index - and the nominal median household income through 2017 (from the Census Bureau).

House Prices and Median Household Income Click on graph for larger image.

This graph shows the ratio of house price indexes divided by the Median Household Income through 2017 (the HPI is first multiplied by 1000).

This uses the annual average National Case-Shiller index since 1976.

As of 2017, house prices were above the median historical ratio - but far below the bubble peak.