Numbers don’t lie. Politicians and economists do.
There (before the last housing bubble) was this rule of thumb: hypothetical folks could afford (via debt instruments) a house costing approximately three times their annual income. Applying that rule in 2019 works like this: $63,000 per year income X 3 = $189,000 home price (with zero down and no costs, etc.). The $63,000 is the average American household income. Therefore, through the magic of usurious multiplication, the average American family should be able to purchase a $189K home.
It doesn’t work out quite that way sometimes. Other debts and expenses eat away at the equation. But, by the old rule, and with a little money down (or some extra financial tricks), Ma and Pa ‘Murica should hypothetically be able to buy the average All-American home for around $200,000. Except, they can’t do that.
Even if all the tricks are in play, it all falls apart because the average US house now sells for $300,000.
The median asking price for a U.S. home hit $300,000 for the first time ever in March, according to housing data from Realtor.com to be released later Thursday and provided early to USA TODAY. That topped the previous peak of $299,000 reached in June and July of last year.
Is there a new 5X rule? It would fit with the new average waistline anyway. But, no. People are just being priced out of the average. That’s now, during the boom to end all booms. If and when prices fall, look for incomes to do the same.
We definitely need more foreign wage competitors in the USE. More financialization too. More politicians and economists.