header logo

Housing prices are relatively stable — we just buy more

Photo credit to Luke Stackpoole

Goals of this article

Housing is expensive. It has been throughout the entire lifetimes of anyone alive today in the developed world. I have peers who are demoralized by the cost of housing and who are convinced that every generation before had it easier. This is objectively not true. In the course of arguing with someone, I was obliged to show it with data. Here are the results.

US housing

The data in this graph comes from several sources from a cursory google search. This is not best practice for a researcher. However, I submit that the data in favor of hysteria and giving up is on much worse footing.

data on home prices in the US

[Caption] The first graph shows the growth in the average home since 1960 (2015 onward from Statista). The second graph shows the median sales price. Next we have the sales price per sq ft, with or without a correction for inflation. Finally I have included the home price cost per square foot in number of hours worked at the median wage.

Home prices are becoming more expensive but they are bigger and in some ways nicer. The insulation is better, the earthquake resistance is higher (in regions where that is important), the climate control is better, and so on. Air conditioning is now in almost all homes where you might need it at least once a year whereas in the 1960s only newer homes in warm climates typically had AC.

It is important to recognize that real estate costs vary widely in the US. Rural Kansas does not sell houses for the same price as New York city (obviously). The gap in costs between the highest zip codes and everywhere else is about a factor of 5-10. San Francisco boasts the most expensive housing stock in the country at an average of $1,000 per sq ft. New York City is "only" $800 per sq ft. However, many cities in the southern and midwestern areas of the US average under $200 per sq ft and in some rural areas, prices are as low as $120 per sq ft, even now at the end of 2023 after the surge in real estate prices following the COVID pandemic.

When normalized by median wage, the differences are stark. San Francisco's median wage is about $100k per year or $50 per hour. Since real estate there sells for $1000 per sq ft, that means the median wage can buy one square foot of the median property for 20 hours of labor. In Houston, TX, the median wage is about $50k per year but the median home price is $165 per sq ft. The median Houstonian can buy one sq ft of living space in the median property for only 6.5 hours of labor.

People spend a larger share of their income on housing than they used to because they buy more house than they used to. If you do not want to be house poor, you have to buy a home that fits into a smaller slice of your income than the average American.

Follow @domesticengine7

© MC Byington