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Home Price to Income Ratio (US & UK)

Home Price to Median Household Income Ratio (US)

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Interpretation

Historically, an average house in the U.S. cost around 5 times the
yearly household income. During the housing bubble of 2006 the ratio
exceeded 7 - in other words, an average single family house in the
United States cost more than 7 times the U.S. median annual household
income.
The Case-Shiller Home Price Index seeks to measure the price level of
existing single family homes in the United States. Based on the
pioneering research of Robert J. Shiller and Karl E. Case the index
is generally considered the leading measure of U.S. residential real
estate prices. The index has a base of Jan 2000=100 and is multiplied
by 1800 in order approximate the Average Sales Price of Houses Sold
for the United States.
According to Mike Maloney this ratio is heavily influenced by
interest rates. When interest rates go down the affordability of a
house goes up, so people spend more money on a house. Interest rates
have now been falling since 1981 when they peaked at 15.32% (for a
10-year US treasury bond).

Data Sources

  * Recent data
      + Federal Reserve Bank of St. Louis: S&P/Case-Shiller U.S.
        National Home Price Index
      + Federal Reserve Bank of St. Louis: Median Income since 1983
  * Historical data
      + census.gov Median Income from 1947 until 1965
      + DaveManuel.com: Median Income from 1967 until 1983
      + Online Data Robert Shiller: Historical US Home prices until
        1983

Further Information

  * BIS: Interest rates and house prices in the United States and
    around the world

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Home Price vs. Median Household Income (US)

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Interpretation

This chart gives a different view of the data from the chart above,
comparing the percentage change between Case-Shiller Home Price Index
(multiplied by 1800, as explained above) and Median Household Income
in the United States over time.

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Average House Price to Average Income Ratio (UK)

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Interpretation

This chart shows the ratio of the average UK house price to average
annual income. The ratio declined steadily throughout the late 19th
and early 20th centuries until the first world war. This was at a
time when the vast majority of British people still rented from
private landlords. The ratio fluctuated mostly between 4 and 7.5
through the rest of the 20th century and increased in economic booms
and financial bubbles.

Data Sources

  * Recent data
      + HM Land Registry: UK House Price Index since 2000
      + Office for National Statistics: Consumer price inflation
        since 2000
  * Historical data
      + Bank of England: Research datasets (A millennium of
        macroeconomic data - House Price Index: A32)
      + Bank of England: Research datasets (A millennium of
        macroeconomic data - Composite Average Weekly Earnings
        series: A47)

Further Information

  * The Guardian: A brief history of British housing

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House Prices vs. Average Income (UK)

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Loading Data

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Interpretation

This chart gives a different view of the data from the chart above,
comparing the percentage change between UK house prices and average
incomes over time.



Page extended with data for the UK, by Will Beaufoy


Download Data for 19.95 USD
 
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