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House Prices to National Average Wage Index


Today, in the Calculated Risk Real Estate Newsletter: House Prices to National Average Wage Index

A brief excerpt: One of the metrics we’d like to follow is a ratio of house prices to incomes. Unfortunately, most income data is released with a significantly lag, and there are always questions about which income data to use (the average total income is skewed by the income of a few people).

The National Average Wage Index increased to $60,575.07 in 2021, up 8.89% from $55,628.60 in 2020. This was the largest percentage increase in wages since 1981 – another reason to compare the current housing cycle to the 1978 to 1982 period (not the housing bubble and bust).

As of 2022, house prices were well above the median historical ratio – and at the level of the bubble peak – even though wages increased sharply in 2021. This suggests house prices are too high based on fundamentals, and I expect house prices to spend 7 years in purgatory.There is more in the article.

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