Average home now costs 5.8 times median income. Why, and what does it portend?

 

For most people the biggest investment they make is buying a home.  Home ownership is a big step up from renting, because you build equity (wealth) in something, which renters obviously don't do.

Back in 1985 the average home cost about 3.5 times the median family income.  As of 2023 the average home cost 5.8 times the median family income--meaning far fewer people could afford to buy a home.

So if homes become less affordable, what does that mean?

Obviously more renters.  And who benefits from that?

Black Rock and similar companies that have been buying up homes by the tens of thousands, anticipating exactly this situation.

So what do you think has caused this?

To some extent it's because the average new home has more high-end amenities than in 1985, because spec builders know people are willing to pay for those features.  Another obvious factor is inflation, with building materials and labor costing much more than in 1985.  But the graph above uses "constant dollars," meaning inflation is backed out of the results.

But the biggest factor is...the federal government.  Wokiez in the Dem party noted--correctly--that home owners were more stable than renters, were less likely to trash their neighborhoods, more likely to get and keep jobs, and so on.  But then they made a predictable error in logic: they concluded that the way to make the nation better was to enable far more pipo to buy a home.  

Problem was, the Democrats essentially ordered banks and mortgage companies to loan money to people who would never have qualified in the past, due to the fact that their history showed they were unlikely to make the required monthly payments.  But the Dems made the gruberment buy the bad loans from banks, so the banks dutifully made loans to unqualified buyers.

The result was predictable: a spike in prices as the new, artificial demand goosed the real estate market.

That in turn caused the "mortgage meltdown," with a ton of homes with defaulted mortages hitting the market.  (If you're under 40 or so you may not know anything of any of this.)

We see exactly the same thing in two other areas where costs have gone exponential:  college, and medical care.  The gruberment has no business paying for either, but the Democrats have demanded it, and the RINOs have obediently gone along because it wins votes.  So both markets have been "goosed" by hundreds of billions--even trillions--of dollars of taxpayer money poured in by duh gruberment.

Take that money out, and the prices will "equilibrate."  But of course no politician has the balls to do that, eh?  Which means...politicians will give even more money to home buyers, as you've seen with the regime offering big money to illegals to let 'em buy homes.

Oh, y'say you didn't hear about dat?  Gee, what a surprise.

So...corruptocrats spend your money to buy votes, resulting in the price of three crucial things--home prices, college degrees and medical care--increasing far more than the rate of inflation.  And no end in sight.

It's almost as if the people ruling you are morons or somethin'.  Nah, dat can't be right, eh?