This post is part of the series Housing Affordability 1971-2009
The purchase of a first home by people I know in their mid-late 20s--a purchase many believed they had been permanently priced out of a few years ago--has been a common theme lately--and for good reason, homes are more affordable now than they have been since at least the 60s. From some of my work friends, to some of my old high-school friends, not a week went by over the last six months where I didn't hear or see (primarily on facebook) a reference towards buying or shopping for a new home, and it makes sense. With mortgage rates at historic lows, lower prices in many areas and a little help from the government, there hasn't been a moment in the last 39 years where housing has been so affordable when compared to buying capacity at current median incomes.
Over the last three years, as the excesses of the housing bubble corrected themselves, we have seen a sustained decline in home values. These declining values have been paired with the loosest monetary policy this country has ever seen, allowing Americans to buy more house for a smaller monthly payment. In this multi-part series we will take a look at how incomes, home prices and interest rates have changed throughout the last 4 decades and how that has affected the ability of a regular household to afford a home. The Series will begin with a post following this one with an introduction to the effect interest rates have on buying capacity and a look at mortgage rates over the last 40 years and will end with an explanation of how numbers were computed, where the data came from, and why certain series were favored over others. I hope you enjoy reading it as much as I enjoyed working on it and, as always, please feel free to leave comments, questions, requests, corrections or complaints in the comments below.