Homes a Bargain Compared to Historic Norms

Dated: 01/17/2019

Views: 121

A loaf of bread used to be a nickel. A movie ticket was a dime.  Not anymore. Houses were also much less expensive than they are now. Inflation raised the price of all three of those items, along with the price of almost every other item we purchase.

The reason we can still afford to consume is that our wages have also risen over time. The better measure of whether an item is more expensive than it was before is what percentage of our income it takes to purchase that item today compared to earlier. Let’s look at purchasing a home.


The COST of a home is determined by three major components: price, mortgage interest rate, and wages. The big question? Are we paying a greater percentage of our income toward our monthly mortgage payment today than previous generations? Surprisingly, the answer is no.


Historically, Americans have paid just over 21% of their income toward their monthly mortgage payment.


Though home prices are higher than before, wages have risen as well. And, the most important component in the cost equation – the mortgage rate – is dramatically lower than it was in the 1970s, 1980s, 1990s, and 2000s.


Today, according to the latest Home Affordability Index just released by the National Association of Realtors, Americans are paying 17.4% of their income toward their mortgage payment. That is much lower than the 21% average previous generations have paid.
Last Chance! Homes are a Bargain Compared to Historic Norms | MyKCM

Bottom Line

The cost of purchasing a home today is a bargain compared to previous generations when we look at it from a percentage of income basis. However, with mortgage rates expected to increase and home prices continuing to appreciate, that will not always be the case. Whether you are buying your first home or looking to move-up to a more expensive home, purchasing sooner rather than later probably makes sense.

Blog author image

Curtis Johnson

Curtis is a Best Selling Author, the Founder and CEO of The Curtis Johnson Team Powered By eXp Realty, where he runs a dynamic Real Estate Team having sold 5,000 residential homes. The Wall Street Jou....

Latest Blog Posts

The Housing Market: Positioned to Bring Back the Economy

The Housing Market: Positioned to Bring Back the EconomyAll eyes are on the American economy. As it goes, so does the world economy. With states beginning to reopen, the question becomes: which

Read More

The Most Important Financial Benefit of Homeownership: Family Wealth

The Most Important Financial Benefit of Homeownership: Family WealthWhile growing up, we were taught by our parents and grandparents that owning a home is a financially savvy move. They explained

Read More

Will the Housing Market Turn Back Around This Year?

Will the Housing Market Turn Back Around This Year?Today, many people are asking themselves if they should buy or sell a home in 2020. Some have shifted their plans or put them on hold over the past

Read More

A Surprising Shift to the 'Burbs May Be on the Rise'

A Surprising Shift to the ‘Burbs May Be on the RiseWhile many people across the U.S. have traditionally enjoyed the perks of an urban lifestyle, some who live in more populated city limits

Read More