Housing Affordability in 2015

From The Anti-Planner, September 22, 2017

Today the Antiplanner continues reviewing 2016 American Community Survey data by looking at housing affordability, a common measure of which is median house prices divided by median family incomes, or value-to-income ratio. Median family incomes are in ACS table B19113, while median home prices are in table B25077.

Hawaii 

• Median home value $592,000
• Median family income $86,768
• Years to buy 6.8 (highest in USA)  
• (Calif #2 at 6.2 years, DC #3 at 5.8 years)

Urban Honolulu

• Median home value $661,700
• Median family income $80,757
• Years to buy 8.2 (25th-highest city in USA)

Honolulu County, Hawaii

• Median home value $658,900
• Median family income $93,131
• Years to buy 7.1

Hawaii County, Hawaii

• Median home value $325,000
• Median family income $65,993
• Years to buy 4.9

Kauai County, Hawaii

• Median home value $558,000
• Median family income $84,633
• Years to buy 6.6

Maui County, Hawaii

• Median home value $600,800
• Median family income $78,797
• Years to buy 7.6

To save you time, I’ve downloaded these tables, pasted the value and income data into one table, and calculated the ratio for the nation, states, counties, cities, and urban areas. For comparison, I have the same data for 2015, 2010, and 2006. As noted yesterday, only some counties, cities, and urban areas are used each year and the list varies from year to year so the rows are not identical each year. The states don’t vary from year to year, so I’ve also provided a spreadsheet comparing value-to-income ratios for the nation and each state for all four years.

All of the numbers, by the way, are actually for the previous year, as the surveys asked people how much they earned and how much their homes were worth the year before the survey. So the number shown as the 2016 value-to-income ratio is actually the ratio in 2015, etc. That means the data are a couple of years behind the current state of housing affordability. Zillow shows that prices in some areas have dramatically increased in the last couple of years to the point where many Silicon Valley homes are selling for 50 percent above their asking prices.

For the 2006 and 2010 surveys, the Census Bureau apparently did not have the ability to estimate median home prices that were above $1 million. The city of Newport Beach exceeded this threshold in 2010, but Zillow says median values there were about $1.3 million in 2009, so I inserted that number. Zillow does not have estimates before 2007, so I wasn’t able to correct numbers in the 2006 table. For the 2015 and 2016 surveys, the Census Bureau was able to estimate median values up to $2 million, and Palo Alto was the only place that exceeded that threshold. I again filled in Zillow values of about $2.5 million in 2015 (for 2016’s table) and $2.1 million for 2014 (for 2015’s table).

The housing bubble peaked in 2006, so in places with bubbles value-to-income ratios were also higher in that year than in the years since. For example, California’s 2006 ratio was 8.3, dropping to 6.2 in 2016. Although housing prices in San Francisco and a few other bubble economies were higher in 2015 than 2005, incomes were apparently also higher as value-to-income ratios were lower. Nationwide, the ratio was 3.2 in 2006 and 2.9 in 2016. However, many places that didn’t have bubbles have seen ratios rise slightly since 2006. For example, Texas’ ratio was 2.2 in 2006 rising to 2.4 in 2016.

Someone with a steady income and no significant debt should be able to easily buy a home that costs less than three times their income, so housing is affordable when ratios are under 3. Ratios between 3 and 5 are signs of growing affordability problems. Ratios above 5 indicate housing is not affordable to most people.

Ratios in 2016 were greater than 5 in California, Hawaii, and the District of Columbia. Oregon and Puerto Rico ratios were above 4 while they were between 3 and 4 in Alaska, Delaware, Florida, Maryland, Massachusetts, Montana, Nevada, New Jersey, New York, Rhode Island, Utah, Virginia, and Washington. Housing was affordable in 34 states keeping the national average below 3.0. I hope you find these data useful. 

BT: How Many Years of Your Life Will Your House Cost You?