The Claim: Home prices would average $ 61,000 today if prices rose at the same rate as the median income over the past 50 years
Millennials have been criticized and ridiculed for buying homes later in life than their baby boomer counterparts, most notably when an Australian millionaire appeared to suggest that millennials’ spending on avocado toast and $ 4 coffee were the source of the problem.
Young Americans backed down by pointing out that American homes are less affordable today than in the past. Recent viral TikTok, Twitter and Facebook posts present such an affordability argument.
The publications claim that if incomes had followed house prices for the past 50 years, potential homeowners would pay less than a fifth of what a typical home costs today.
“If house prices had risen at the same rate as the median income in this country, a house in 2021 would cost an average of $ 61,000,” it reads a tweet from August 3.
The tweet, based on a popular video from TikTok, racked up more than 34,000 retweets in a month. Similar allegations have been shared thousands of times on Facebook, including a The September 1 post was shared nearly 9,000 times in a matter of weeks.
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But the claim is wrong. If the median home price increased at the same rate as the median household income since 1970, it would be around $ 134,000 today. Even that figure shouldn’t be taken at face value, as experts say such comparisons can be misleading without context about the many economic and geographic factors that influence home prices.
USA TODAY has reached out to social media users who shared the request for comment.
Post mistakenly compares different types of income
The viral tweet from the TikTok video said American homes would cost around $ 61,000 if prices had risen to keep pace with incomes over the past 50 years, but this is based on a miscalculation.
The figure is skewed because, instead of comparing the same types of income, TikTok user Madeline Pendleton compared median family income in 1970 to median personal income in 2019. As a result, Pendleton said that median income increased from $ 9,870 to $ 35,977.
Examining median household income in 1970 and 2019 is a more accurate comparison of apples to apples, and it’s a measure that Harvard University’s Joint Center for Housing Studies uses to compare prices and prices. income from homes. Using this measure, income has increased from $ 8,730 to $ 68,703 since 1970, according to data from the US Census Bureau.
Based on a median home value of $ 17,000 in 1970, the median home price today would be $ 133,786 if it had increased at the same rate as household income. That’s more than double Pendleton’s estimate, but it’s still well below the median price of homes sold in the second quarter of 2021.
(The viral tweet captured on Facebook said that homes would cost “an average of $ 61,000,” but the TikTok cited by the author of the tweet is calculated based on medians, not averages. Median home selling prices are generally used as a national index rather than averages, as a few extremely expensive homes can significantly skew the average.)
Experts say it’s hard to compare home sales in 1970, 2021
But math isn’t all that is wrong with that claim, experts say. It ignores many other factors that have influenced home prices over the past 50 years.
Alexander Hermann, senior research analyst at Harvard Housing Center, said interest rates are at an all-time low, allowing homeowners to sell for higher prices without significantly changing monthly mortgage payments buyers.
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Another complicating factor is that housing markets vary by location, so one national statistic will not apply uniformly everywhere.
“You include (in a national median) the most rural areas of the country and San Francisco,” said Erica Groshen, labor economist at Cornell University who was commissioner of the Bureau of Labor Statistics from 2014 to 2017, USA TODAY . “There are a lot of places in the country where house prices haven’t gone up much at all.”
For example, house prices in the San Diego-Carlsbad area are now over
eight times higher than the median income there, but the area had a much lower price-to-income ratio (around 4) in the 1980s, according to data from the Joint Center for Housing Studies. Meanwhile, the Pittsburgh and St. Louis areas are among areas of the country whose affordability has changed little over the past forty years.
It’s also important to remember that a house in 1970 doesn’t necessarily compare to a house in 2021, Groshen said, because it didn’t have the same amenities.
“Some people say the cost of living was much lower in 1880 compared to income… but do you really want to live in a world without antibiotics?” Groshen said. “There are these big leaps that are hard to express in just these changes in quality from year to year.”
Finally, house prices are linked to supply and demand in the market, not necessarily to income,Hermann said.
Price-to-income ratio shows that homeownership is less accessible today
Experts say there’s a simpler, more accurate measure to show how home affordability has changed over the past 50 years: the price-to-income ratio.
While there are limitations, data using this measure suggests that homes are much less affordable for low- and middle-income Americans today.
Hermann said the median selling price of a home was equivalent to about 2.6 years of median household income in 1970. In 2020, it was equivalent to 4.4 years of median income, according to a recent report from the Joint Center for Housing Studies.
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As this ratio increases, homeownership becomes less accessible. Higher selling prices almost always mean higher down payments, which creates a greater barrier to entry for middle- and lower-income households, Hermann said.
This analysis is limited by factors such as low interest rates and local fluctuations in house prices. But Hermann said statistics still show that homeownership is less accessible today than it has been in most of U.S. history.
Our rating: False
Based on our research, we find FALSE the claim that house prices would average $ 61,000 today if prices rose at the same rate as the median income over the past 50 years.
The median home price today would be $ 133,786 if it had increased at the same rate as the median household income since 1970. The TikTok user who calculated the figure of $ 61,000 underestimated the growth income by incorrectly comparing median family income in 1970 to median personal income in 2019. In addition, experts say that a comparison between median income and selling prices is too simplistic and potentially misleading given the many factors economic and geographic factors that influence house prices.
Our sources of fact-checking:
- Alexander Hermann, September 8, telephone interview with USA TODAY
- Erica Groshen, Sep 8, Telephone interview with USA TODAY
- @CrappyFumes, August 3, Twitter
- Madeline Pendleton, July 31, TikTok
- US Census Bureau, May 20, 1971, Median Family Income Up in 1970 (report number P60-78)
- US Census Bureau, July 27, 1971, Household income in 1970 and selected social and economic characteristics of households
- US Census Bureau, September 15, 2020, Was household income the highest on record in 2019?
- US Census Bureau, June 6, 2012, Historical Dwelling Census Tables – House Values
- Federal Reserve Bank of St. Louis, Updated July 26, Median Home Sold Price for the United States
- Federal Reserve Bank of St. Louis, accessed September 21, Average US Home Selling Prices
- Federal Reserve Bank of St. Louis, accessed September,
- Harvard University Joint Center for Housing Studies, September 2018, Figure 2: The median selling price in 2017 is more than four times the median household income
- Harvard University Joint Center for Housing Studies, 2021, State of the Nation’s Housing
- Harvard University Joint Center for Housing Studies, September 13, 2018, Price-to-Income Ratios Approaching All-Time Highs
- Harvard University Joint Center for Housing Studies, September 13, 2018, House Price / Income Ratios, 1980 – 2017
- The Wall Street Journal, April 15, The US housing market is nearly 4 million homes below buyer demand
- CNBC News, April 24, 2017, Here’s the startling truth about first-time home buyers
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