Home Price to Income Ratio

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Interpretation

Historically a house in the US cost around 3 to 4 times the median annual income. During the housing bubble of 2007 the ratio surpassed 5 - in other words, the median price for a single family home in the United States cost more than 5 times the US median annual household income. The Shiller Case Homes Price Index seeks to measure the price of all existing single-family housing stock. 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. According to Mikey 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).

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