Home Payments as % of Median Income

[Chris Seveney]

I saw this online the other day. Its percent of home payment to median income which has been skyrocketing over the past few years. I had mentioned in the past 1 of 2 things is going to happen:

1. This goes back to the norm level or comes down. There are 3 ways this can happen

a) Salaries increase (unlikely)

b) Interest rates drop (not very likely since we I believe we have $8T of debt to sell next year that is coming off books and China and Russia are not buying US dollar as much

c) Home prices drop

2. Status quo and anyone born after 2008 will not be buying a home until they are in their 40's if they are lucky and we will have a generation of renters or kids whose parents passed down a lot of $ to them.

Which one do you think will happen? Personally I am thinking 1c.

[Jay Hinrichs]

Quote from @Bill B.:

1) I think it’s “funny” that not one news article I ever read for the last 5 years had headlines like “Housing at historical record lows! Buy now!”

2) I bet you could draw that same or even more extreme graph for new car prices. What’s the guess on what happens there? 

3) Average income was up 4.5% in 2024. It wouldn’t take much time with “steady” home prices for the graph to self correct. 

4) I assume at least some of this is choice. People are not choosing the cheapest housing available. Many are choosing the most expensive they can afford on purpose. And to a lesser extent gig work, house hacking, roommates. 

exactly right.. I work extensively funding deals for flippers in KC  Toledo  Cleveland Baltimore city and a few other markets in mid west.. And all the deals I do the exit on a fully rehabbed home that I fund and pay for the rehab etc for my clients. is basically 250 and under ..
there is not an issue with affordability in much of the US the issue is buyers preferences.
So they will rent without buying even though buying is available to them but they dont want to live where its affordable. Human nature I guess..