We can see that trend in the latest update to our chart tracking the ratio of the trailing twelve month averages of median new home sale prices to median household income. Through April 2021's preliminary estimates, we find the typical new home sold in the U.S. now costs 5.24 times the typical household income.
We're introducing a new chart today to more clearly communicate the trends for the relative affordability of new homes sold in the U.S. Here, a rising trend corresponds with new homes becoming relatively more affordable, while a falling trend indicates new homes are becoming less affordable.
Mathematically, the chart simply expresses the inverse of the data indicated in our chart showing the ratio of median new home sale prices to median household income as a percentage.
Since 1971, we find the relative affordability of new homes sold in the U.S. have been generally falling over time, which has periodically been punctated by short term periods where either fell faster than median household income, such as during the housing bust of 2006-2009, or when median household incomes rose much faster than new home prices, as in the period from late 2017 to early 2020.
The latest short term downtrend coincides with rapidly escalating prices combined with stagnant income growth. That combination is contributing to the fastest decline in the relative affordability of new homes recorded during the 21st century.
U.S. Census Bureau. Median and Average Sales Prices of New Homes Sold in the United States. [Excel Spreadsheet]. Accessed 5 June 2021.
Political Calculations. Median Household Income in April 2021. [Online Article]. 2 June 2021.