(NEXSTAR) – Browsing real estate listings is enough to make you wish you invented a time machine so you could have bought a house a generation ago. The following article may also have that effect.
The median price of a new home these days is about $426,000, according to U.S. Census Bureau data. Looking back at 1980, the median new home cost more like $68,000. But the 1980s weren’t exactly considered an easy time to buy a home.
Few periods have been as expensive to buy a home as the 1980s, when sky-high mortgage rates nearing 19% made home loans feel insurmountable,” writes Anja Solum for personal finance site MoneyGeek.
Mortgage rates today are nowhere near that high, but it’s widely considered harder to buy a home now than it was 40 years ago. Why? Home prices have grown far faster than people’s income.
One figure that measures affordability for buyers, house price-to-income ratio, has nearly doubled since 1980, MoneyGeek reports.
The states with the highest home price-to-income ratios won’t surprise anybody: Hawaii and California. Those two states also ranked highest in 1980, MoneyGeek found.
On the other hand, Idaho, Massachusetts and Montana all rank among the least affordable states now, but were not in the top 10 in 1980.
House price-to-income ratio: Now vs. 1980
| 10 HIGHEST IN 2023 | 10 HIGHEST IN 1980 |
|---|---|
| Hawaii (8.9) | Hawaii (5.1) |
| California (7.6) | California (4.1) |
| Washington (6.1) | Nevada (3.3) |
| Oregon (6.1) | Colorado (3.1) |
| Colorado (5.9) | Oregon (3.0) |
| Nevada (5.8) | Arizona (2.9) |
| Idaho (5.7) | Connecticut (2.9) |
| Massachusetts (5.7) | Washington (2.9) |
| Utah (5.5) | Utah (2.9) |
| Montana (5.5) | New Mexico (2.7) |
The housing affordability problem is worse in America’s cities. The home price-to-income ratio has reached an all-time high in 78 of the 100 largest metro areas, according to research by the Joint Center for Housing Studies of Harvard University.
“Price-to-income ratios that low were the norm across much of the country in prior decades. Indeed, fully two-thirds of large markets had price-to-income ratios below 3.0 as recently as 2000,” wrote researchers Alexander Hermann and Peyton Whitney, summarizing their work.
Now, the only remaining major metro area with a ratio below 3 is Syracuse, New York.
Another way to evaluate housing affordability is how much people spend monthly to cover the cost of housing. Households that spend more than 30% of their income on housing are considered “burdened” by the U.S. Department of Housing and Urban Development Households that spend more than 50% are considered “severely burdened.”
In 1980, people in South Dakota were spending the biggest chunk of their paychecks on housing. Now, it’s Californians forking over the most.
Average monthly spending on housing: Now vs. 1980
| 10 HIGHEST IN 2023 | 10 HIGHEST IN 1980 |
|---|---|
| California (35.7%) | South Dakota (28.3%) |
| New York (35.5%) | New York (27.3%) |
| Hawaii (34.5%) | North Dakota (27.1%) |
| Texas (32.8%) | Nevada (26.4%) |
| Louisiana (32.2%) | Arizona (26.2%) |
| New Jersey (32.2%) | Rhode Island (25.7%) |
| Florida (31.9%) | Massachusetts (25.5%) |
| Massachusetts (31.6%) | New Hampshire (25.4%) |
| Oregon (31.3%) | New Jersey (24.3%) |
| Connecticut (30.8%) | Florida (24.3%) |
High housing costs affect buyers and renter. More than 21 million households are burdened by rent, the U.S. Census Bureau found in its 2023 American Community Survey, released in September. The annual survey of U.S. households found that 49.7% of renter households qualify as “rent burdened,” meaning they spend more than 30% of their pre-tax income on rent.
Those looking for a more affordable lifestyle should look to the Midwest. A recent report by real estate site Clever ranked Toledo, Ohio, as the most affordable city in the U.S., followed by Wichita, Kansas; Little Rock, Arkansas; Akron, Ohio; and Pittsburgh, Pennsylvania.
