The other side of the home values problem

What you hear about is foreclosures and lost value due to the housing bubble. Mark Perry hits the other side of this by noting that Housing Affordability is Now at a Record High. Does That Counteract Any of the Stagnation Narrative?

Bottom Line: Doesn’t historically high housing affordability at least partially offset some of the narrative of stagnating income, the shrinking middle-class, and how younger generations today will be worse off economically than their parents, and how struggling household today needs to have both parents working full-time to survive financially, etc.?

There may not have been any generation in history that has faced such incredibly affordable home ownership, especially when a young couple is buying a first home to get started in life, invest in a home, and raise a family. At least in terms of housing affordability, young, middle-class Americans have never had it this good.

Major mortgage companies are advertising rates below 4% now. Back in 1981 or so, the rate peaked at 16% or more and the housing affordability index indicated that the typical family was earning only 65% of the income necessary to qualify to purchase a median price home. That index is now approaching 200% meaning that the ability to purchase a home is a much less difficult financial problem.

Given the facts that: a) housing/shelter is the greatest single expense for American households by far, and b) housing affordability is at an all-time historical high, doesn’t that have to transfer into a huge increase in the standard of living for many Americans, especially younger, first-time, middle-class home buyers?

But, of course, that doesn’t fit the meme of the good old days …

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