Homeownership growing more difficult for Millenials; home values outpacing income

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The American dream of homeownership has become a more difficult goal to obtain for GenX, Millenials, and younger generations according to a new report by Real Estate Witch.

The company, which says it is committed to increasing real estate transparency for consumers, is reporting that since 1965, home prices have increased 7.6 times faster than income.

After adjusting for inflation, an average home valued at $171,942 in 1965 is worth 374,900 in 2021, an 118% increase. However, median household incomes have only increased by 15%. In 1965, the median household income was $59,920 to $69,178.

To afford a home in 2021, Americans need an average income of $144,192 — but the current median household income is actually $69,178.

When it comes to finding an affordable community to live in you can consider looking at the area’s average house-price-to-income ratio.

Experts recommend a house-price-to-income ratio of 2.6. Just six of the 50 biggest metro areas in the United States have a ratio lower than or equal to the recommended 2.6.

Here are the six most affordable metro areas for housing are:

  1. Pittsburgh (2.2)
  2. Cleveland (2.4)
  3. Oklahoma City (2.5)
  4. St. Louis (2.5)
  5. Birmingham, Ala. (2.5)
  6. Cincinnati (2.6)

The six least affordable metro areas for housing are:

  1. Los Angeles (9.8)
  2. San Jose (9.1)
  3. San Francisco (8.3)
  4. San Diego (7.8)
  5. New York City (6.6)
  6. Riverside, CA (6.0)

In the 10 most expensive cities, the average house-price-to-income ratio climbed to 6.9 in 2021 — a 61% increase since 2000. 

In 2000, the average home value was $271,707 in the 50 most populated cities. By the 2008 housing crisis, average home values had jumped to $304,589 — a 24% increase. Today, home values have increased by an additional 39% to $376,826.

Realestatewitch.com used U.S. Census data to calculate the national median household incomes and new residential home values.

To calculate house-price-to-income ratios for the 50 most populous U.S. metro areas, we used Zillow’s Home Value Index (ZHVI) to estimate home values and estimated family income sourced from the Department of Housing and Urban Development.

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