The Wall Street Journal published an article with an interesting headline: “Homes Earned More for Owners Than Their Jobs Last Year” last week. Last year, the value of the average home in the US surged $52,667 to $321,634 an increase of over 16%. Meanwhile, the average full-time worker earned just around $50,000. An investment in property made Average Joe more money than his annual salary. So, homeowners are very happy but what about the other 250 Mio. US citizens that do not own their home?
If prices of homes outpace income, who will then be able to afford his own home in the future? The best way to measure home affordability is by counting how many years of income it takes to buy the average house. In 1960, for example, it took 2.1 years of average income to buy the average home. Today, you need more than 6 years.
Of course, when homes cost more then landlords want more rent. That’s a big problem for renters.
The average two-bedroom rental increased by 22%. So, if you are not in a position to buy your own home, and rental cost increases even at a faster pace how will you be able to pay for your monthly living cost in future?
Sven Franssen