A 40-Year Retrospective: U.S. Home Price Growth vs. Affordability

I came across some fascinating insights into the long-term trends of the U.S. housing market that I think you’ll find intriguing, especially if you’re considering long-term real estate investments.

Four Decades of Home Price Increases: Over the past 40 years, U.S. home prices, as tracked by the Freddie Mac House Price Index, have experienced a substantial increase of 494%. This growth varies significantly by state, with Washington leading the pack at an 828% increase, followed by Oregon at 699%, and Rhode Island at 668%. These are staggering numbers, showing substantial growth across several regions.

Comparison with Inflation and Income Growth: While home prices have skyrocketed, overall inflation and median U.S. household incomes have risen at a much slower pace—203% and 233% respectively. This disparity highlights a significant shift in the economic landscape of housing.

Assessing Housing Affordability in 2024: Despite these dramatic price increases, when we factor in current mortgage rates, the affordability of housing in 2024 isn't drastically different from what it was back in 1984. Back then, mortgage rates were between 13.0% to 15.0%, compared to around 7.0% today. This has somewhat mitigated the impact of rising home prices on affordability, though rising costs like property taxes and home insurance do pose additional challenges.

Looking Ahead: It’s crucial to remember that the trajectory of home prices has not been a smooth upward journey and future trends may not mirror the past. Understanding these historical patterns is key to making informed decisions in real estate.

If you’re pondering how these insights could impact your property decisions, or if you need more detailed data to strategize your investments, let’s set up a time to discuss. This kind of information could be crucial in planning your next steps in the housing market.