Home Payments as % of Median Income

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

I saw this online the other day. Its percent of home payment to median income which has been skyrocketing over the past few years. I had mentioned in the past 1 of 2 things is going to happen:

1. This goes back to the norm level or comes down. There are 3 ways this can happen

a) Salaries increase (unlikely)

b) Interest rates drop (not very likely since we I believe we have $8T of debt to sell next year that is coming off books and China and Russia are not buying US dollar as much

c) Home prices drop

2. Status quo and anyone born after 2008 will not be buying a home until they are in their 40's if they are lucky and we will have a generation of renters or kids whose parents passed down a lot of $ to them.

Which one do you think will happen? Personally I am thinking 1c.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Quote from @Bill B.:

1) I think it’s “funny” that not one news article I ever read for the last 5 years had headlines like “Housing at historical record lows! Buy now!”

2) I bet you could draw that same or even more extreme graph for new car prices. What’s the guess on what happens there?

3) Average income was up 4.5% in 2024. It wouldn’t take much time with “steady” home prices for the graph to self correct.

4) I assume at least some of this is choice. People are not choosing the cheapest housing available. Many are choosing the most expensive they can afford on purpose. And to a lesser extent gig work, house hacking, roommates.

exactly right.. I work extensively funding deals for flippers in KC Toledo Cleveland Baltimore city and a few other markets in mid west.. And all the deals I do the exit on a fully rehabbed home that I fund and pay for the rehab etc for my clients. is basically 250 and under ..
there is not an issue with affordability in much of the US the issue is buyers preferences.
So they will rent without buying even though buying is available to them but they dont want to live where its affordable. Human nature I guess..

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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
1y
Quote from @Chris Seveney:

I saw this online the other day. Its percent of home payment to median income which has been skyrocketing over the past few years. I had mentioned in the past 1 of 2 things is going to happen:
1. This goes back to the norm level or comes down. There are 3 ways this can happen
a) Salaries increase (unlikely)
b) Interest rates drop (not very likely since we I believe we have $8T of debt to sell next year that is coming off books and China and Russia are not buying US dollar as much
c) Home prices drop
2. Status quo and anyone born after 2008 will not be buying a home until they are in their 40's if they are lucky and we will have a generation of renters or kids whose parents passed down a lot of $ to them.
Which one do you think will happen? Personally I am thinking 1c.

1c but 2 being more true then we would like.
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
1y
1) I think it’s “funny” that not one news article I ever read for the last 5 years had headlines like “Housing at historical record lows! Buy now!”
2) I bet you could draw that same or even more extreme graph for new car prices. What’s the guess on what happens there?
3) Average income was up 4.5% in 2024. It wouldn’t take much time with “steady” home prices for the graph to self correct.

4) I assume at least some of this is choice. People are not choosing the cheapest housing available. Many are choosing the most expensive they can afford on purpose. And to a lesser extent gig work, house hacking, roommates.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @Bill B.:

1) I think it’s “funny” that not one news article I ever read for the last 5 years had headlines like “Housing at historical record lows! Buy now!”
2) I bet you could draw that same or even more extreme graph for new car prices. What’s the guess on what happens there?
3) Average income was up 4.5% in 2024. It wouldn’t take much time with “steady” home prices for the graph to self correct.

4) I assume at least some of this is choice. People are not choosing the cheapest housing available. Many are choosing the most expensive they can afford on purpose. And to a lesser extent gig work, house hacking, roommates.

exactly right.. I work extensively funding deals for flippers in KC Toledo Cleveland Baltimore city and a few other markets in mid west.. And all the deals I do the exit on a fully rehabbed home that I fund and pay for the rehab etc for my clients. is basically 250 and under ..
there is not an issue with affordability in much of the US the issue is buyers preferences.
So they will rent without buying even though buying is available to them but they dont want to live where its affordable. Human nature I guess..
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
1y
I predict interest rates come down, and perhaps housing prices in certain areas but not in most areas. Interest rates are going to have to come down because there's no way the federal government can afford long-term interest payments at these higher levels, and other countries are going to buy our debt even if their return sucks because there's no realistic viable alternative. US debt is not going to be so much for making wealth as much as for preserving wealth.
This lesson came home to me talking to a guy near my STR in Florida a couple of years ago from the Middle East. He was telling me about several of his friends trying to buy houses in Florida for STRs but getting outbid, and I asked him how they could make any money at the prices they were paying. He told me they don't care if the houses make money, only that they more or less hold their principal because what we think of here in the US as volatility is laughable to most of the rest of the world.
A lot of the US market - housing, stock, treasuries, etc - is basically a legal money-laundering location for honest or ill-gotten gains in the rest of the world, because the markets are open to foreigners and as close to a guaranteed safe haven as can be found. The average person would be shocked but even our enemies like Iran and Russia are still buying our assets through shell companies.
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Kevin S.
Member since 2024 · 400 posts · 240 votes
1y
@Bill B.
It will give rise to a new option for younger generation. A 40 yr mortgage!
Like you mentioned about car buying. Car buying are made 'affordable' with 6yrs payment instead of 5 yrs. God knows at some point everything will be based on 60yrs/lifetime payment from day you are born!!
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
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A bit of 1c depending on inventory and 2. Affordability isn't a right, it can remain totally preposterous. Go look at the global market, it's just like that. Thee richest of the richest globally will put 100% of their funds towards USA assets. That's been the direction since covid.

I think you're missing another point-- if rates increase. Could put more pressure on 1c than just inventory or increase in permitting.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @V.G Jason:

A bit of 1c depending on inventory and 2. Affordability isn't a right, it can remain totally preposterous. Go look at the global market, it's just like that. Thee richest of the richest globally will put 100% of their funds towards USA assets. That's been the direction since covid.

I think you're missing another point-- if rates increase. Could put more pressure on 1c than just inventory or increase in permitting.

I agree. I also think what a lot of people on BP miss is the percentage of homes that are either owned by super wealthy investors or just investors is very low. While I agree a lot of $ flows thru US, its still the everyday middle class person that drives the economy.
I read two interesting datapoints today:
1. Jobs will be revised in 2024 to show a net loss in jobs.
2. The US has $9 trillion in debt maturing next year that they will have to sell new bonds for that debt. This will be the largest bond sale in US history coming up which on top of the debt we are also running as well - if we have so much debt to sell I do not see rates going down, I think they may rise (or stay around where they are at).
Not trying to be a debbie downer, but I see no news economically that is pointing to things getting better.
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Quote from @Chris Seveney:

Quote from @V.G Jason:

A bit of 1c depending on inventory and 2. Affordability isn't a right, it can remain totally preposterous. Go look at the global market, it's just like that. Thee richest of the richest globally will put 100% of their funds towards USA assets. That's been the direction since covid.

I think you're missing another point-- if rates increase. Could put more pressure on 1c than just inventory or increase in permitting.

I agree. I also think what a lot of people on BP miss is the percentage of homes that are either owned by super wealthy investors or just investors is very low. While I agree a lot of $ flows thru US, its still the everyday middle class person that drives the economy.
I read two interesting datapoints today:
1. Jobs will be revised in 2024 to show a net loss in jobs.
2. The US has $9 trillion in debt maturing next year that they will have to sell new bonds for that debt. This will be the largest bond sale in US history coming up which on top of the debt we are also running as well - if we have so much debt to sell I do not see rates going down, I think they may rise (or stay around where they are at).
Not trying to be a debbie downer, but I see no news economically that is pointing to things getting better.

I cannot tell if you're more pessimistic or cynical than me.
As for the point before you're first-- yes most folks think it's institution driving up these prices. No it's your friends boomer parents giving the downpayment to your Gen Z/millennial friend to buy that house to their newlywed son with their new daughter in law/wife being emotional and running up the price because it's a "dream" house. Then regretting the lack of affordability about 3 payments in. Then it's them unable to sell in the money, and buy a new one cause rates locked up the previous buyers.
The 1st point is the real state of unemployment. This is a net job less including job displacement. I forgot the poster, but the McDonalds man needs to get a taste of this reality.
2nd point, rise before they trend back to where they are now is my expectation.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @V.G Jason:

Quote from @Chris Seveney:

Quote from @V.G Jason:

A bit of 1c depending on inventory and 2. Affordability isn't a right, it can remain totally preposterous. Go look at the global market, it's just like that. Thee richest of the richest globally will put 100% of their funds towards USA assets. That's been the direction since covid.

I think you're missing another point-- if rates increase. Could put more pressure on 1c than just inventory or increase in permitting.

I agree. I also think what a lot of people on BP miss is the percentage of homes that are either owned by super wealthy investors or just investors is very low. While I agree a lot of $ flows thru US, its still the everyday middle class person that drives the economy.
I read two interesting datapoints today:
1. Jobs will be revised in 2024 to show a net loss in jobs.
2. The US has $9 trillion in debt maturing next year that they will have to sell new bonds for that debt. This will be the largest bond sale in US history coming up which on top of the debt we are also running as well - if we have so much debt to sell I do not see rates going down, I think they may rise (or stay around where they are at).
Not trying to be a debbie downer, but I see no news economically that is pointing to things getting better.

I cannot tell if you're more pessimistic or cynical than me.
As for the point before you're first-- yes most folks think it's institution driving up these prices. No it's your friends boomer parents giving the downpayment to your Gen Z/millennial friend to buy that house to their newlywed son with their new daughter in law/wife being emotional and running up the price because it's a "dream" house. Then regretting the lack of affordability about 3 payments in. Then it's them unable to sell in the money, and buy a new one cause rates locked up the previous buyers.
The 1st point is the real state of unemployment. This is a net job less including job displacement. I forgot the poster, but the McDonalds man needs to get a taste of this reality.
2nd point, rise before they trend back to where they are now is my expectation.

I think if we were running the 40 yard dash of cynicism and pessimism we would be neck and neck based on all our posts :)
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Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
1y
@Chris Seveney, I'm not sure I follow your thinking about 1b. When you're talking about interest rates dropping I think you mean mortgage rates but the government isn't getting rich off of those. Also, the rate the fed is always adjusting isn't the mortgage rate only something that influences it.
If the government wants the debt to drop, forcing interest rates lower would likely help that by stimulating the economy. Almost every action taken in the economy is taxed and the faster the economy chugs forward the more taxes they collect. Combine that with some government austerity and the debt issue improves.
I personally don't see prices changing much until something seriously breaks. Market forces are pushing and pulling but not a source of anything breaking. Commercial real estate is more likely to break and other changes with the new administration are likely to break things in ways that cannot be anticipated. At that point prices may drop but that could be over a year away yet.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Kevin Sobilo:

@Chris Seveney, I'm not sure I follow your thinking about 1b. When you're talking about interest rates dropping I think you mean mortgage rates but the government isn't getting rich off of those. Also, the rate the fed is always adjusting isn't the mortgage rate only something that influences it.
If the government wants the debt to drop, forcing interest rates lower would likely help that by stimulating the economy. Almost every action taken in the economy is taxed and the faster the economy chugs forward the more taxes they collect. Combine that with some government austerity and the debt issue improves.
I personally don't see prices changing much until something seriously breaks. Market forces are pushing and pulling but not a source of anything breaking. Commercial real estate is more likely to break and other changes with the new administration are likely to break things in ways that cannot be anticipated. At that point prices may drop but that could be over a year away yet.

sorry meant mortgage rates when I refer to interest rates.
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Account Closed
Member since 2021 · 22 posts · 3 votes
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This is probably cheating, but I'm going to say that it's going to be all the above. Ranking in order though...
1) Prices will drop - 10-20% because the job market is getting tougher
2) Salaries will increase - 3-4% per year to keep up with inflation
3) Interest rates will drop - 100-150bps as people worry less about inflation
4) Unfortunately, the dream of a house with a white picket fence will be out of reach for many, especially before the age of 40. I believe that many will be able to purchase a townhome or condo, but not that dream home close to the city.
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Quote from @Account Closed:

This is probably cheating, but I'm going to say that it's going to be all the above. Ranking in order though...
1) Prices will drop - 10-20% because the job market is getting tougher
2) Salaries will increase - 3-4% per year to keep up with inflation
3) Interest rates will drop - 100-150bps as people worry less about inflation
4) Unfortunately, the dream of a house with a white picket fence will be out of reach for many, especially before the age of 40. I believe that many will be able to purchase a townhome or condo, but not that dream home close to the city.

1 month in, I think 1-2 are right but #3 is tricky.

With the reaction to tariffs, the market seems to think Fed Funds will reduce by late Q2. I don't think that happens without one two things; a harsh hit in the economy or a light hit in the economy + 10 year screaming. The latter would create mortgage rates issues, the former will eliminate a lot of fake demand and some material real demand in the housing market that is bid side.

Mortgage rates higher + build costs higher(less labor + tariffs)= Kill demand. Inventory will naturally tick up, because of what I feel is misdirection of agents by stressing spring season selling. Now we see 2023 in reverse, where that year had real demand greater than real supply. We'll see real supply greater than real demand.

Every local is different obviously, but I am talking in general. I still think we hit 8 before we hit 6. If that happens during the spring, this is could be a devastating RE transactional year.
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Account Closed
Member since 2021 · 22 posts · 3 votes
1y
A month later, you're probably right. Inflation continues to be elevated, even if it's under the 2022 levels.
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
A hotter CPI report than expected; if we get another one or two of these do rates increase or do we first see no expectation of a rate cut in the rest of 2025?
This would likely move the 10 year down, and therefore mortgages.
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Austin WolffPro Member
Rental Property Investor · Los Angeles, CA · Member since 2024 · 101 posts · 134 votes
1y
I'm going to be uncharacteristically pessimistic and say #2 is more likely -- just because it's the worst-case scenario for people, doesn't mean it's less likely. The wealth gap has been increasing, and I just don't see this gap coming down. Wealth gaps tend to increase in a country over-time anyway (asset owners become more wealthy as the government prints more money). It's just going to be harder for people my age and younger. Unfortunately, it's something I think we should all get used to.
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Austin WolffPro Member
Rental Property Investor · Los Angeles, CA · Member since 2024 · 101 posts · 134 votes
1y
There's no law of physics or finance that says housing has to be affordable. That's why I think #2 is a possible reality.

However, if I must participate in discussing #1, I don't think home prices will be going down in nominal dollars. However, in real dollars, home values have absolutely gone down in many markets. So I do think 1a is likely, if wages are somehow able to keep up with inflation, and home price growth is slower than inflation.
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
It's turning into C in some markets and 2 in the others. The rate volatility is definitely contributing to the the ultimate underlying thesis in today's world-- unpredictability.
Seeing some houses list under their 2022 sale price. That's very telling.
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Anyone have a stat of the amount of price cuts, relist/delist yoy in major metros?
This is the end of peak seasonality for most markets and it's an egregious stall fest. Can't say we didn't see it coming.
I think the overlooked aspect isn't the rate lock, but also the underwater aspect.
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