Off-the-Charts Historical Discrepancy Between Income and Housing Costs
If one ever wonders why housing seems to get progressively more expensive compared to income, a recent report released by Clever Real Estate offers some unique insight. According to the report, based on census data since 1960, incomes nationwide have risen 29% while rents have increased by 72% and house prices have increased a whopping 121%. In some major cities, this discrepancy is causing an all too familiar housing crisis where people perpetually struggle to afford their rent or a mortgage, which naturally causes a paycheck-to-paycheck lifestyle and increased consumer debt. The idea that 30%-40% of household income should go to total housing costs could quickly become unrealistic for many people. Consider the impact on each region of the country since 1960, adjusted for inflation:
Northeast - Income up 38%; Rent up 84%; House Prices up 159%
Southeast - Income up 49%; Rent up 93%; House Prices up 156%
Midwest -Income up 29%; Rent up 37%; House Prices up 82%
West - Income up 26%; Rent up 72%; House Prices up 195%
No doubt there are fluctuations as the years go by, especially during economic contractions. Perhaps it is interesting to consider that personal economic contribution helps pull the economy through downturns. However, if more-and-more income is swallowed up by housing costs then it stands to reason that personal economic contribution at each economic downturn could get progressively more challenging.