House Affordability over the Last 10 years

Housing is a significant financial decision. It is the largest expense for most people and a current hot topic. We have seen a dramatic rise in average price over the last few years. Is homeownership worth it now that prices in America have surged? In this article I examine house affordability over the last 10 years.

Price Increase in the Last Decade

Average current home price (January 2021) is $408,800.

From the low price point in the last decade (2011), average price has increased from $267,900 to $408,800. This is a 4.3% average annual increase. Can you see how simply changing from $ to % affects perspective?

The Other Side of the Equation – Income

Over the last 9 years – average US income (per household) has increased 2.85% annually ($65,132 to $83,886)

Home Affordability

Home prices increased faster than income. However, there’s another factor to consider – interest rates. Below we examine Payment to Income ratio based on 30-year mortgage rates in 2011 and today.

2011 House:

Homeowner’s insurance – based on my experience in Texas and review of various website estimates

Property tax – estimate in this tool (For my Texas readers, if this seems low, it is. We have the 3rd highest rate in the country – no state income tax though 😊)

2011 interest rate source:


Payment to Income ratio (using 2012 average income data):

Monthly Payment = $1,590 / Monthly income ($65,132/12 = $5,428) = 29%

2021 House:

Current Payment to Income ratio (using 2020 average income data):

Monthly Payment $2,212 / Monthly Income ($83,886/12 = $6,991) = 31%

Mortgage expense has increased over the last decade – from 29% to 31% of average income. Keeping this ratio as low as possible is critical for financial independence seekers. In this scenario that is 2% of your (after-tax) income that you cannot contribute to retirement. That 2% equals $140/month. Hypothetical results from investing $140 over a 30-year period (assuming an 8% annual return):


Additionally, Payment to income ratio is not the only consideration. See my analysis and data on other factors of owning more larger and more expensive homes, such as upkeep, utility costs and general #Joneses’ Tax expense.

In summation, house prices have outpaced income change significantly over the last decade, but payment as a percentage of income has risen less dramatically due to declining interest rates. Now that we’ve reviewed house affordability over the last 10 years in America, let’s examine international homeownership affordability for context.

International Affordability

Green are the most affordable home price countries as measured by Price to Income ratio:


*source calculates income as: net disposable family income, as defined as 1.5 * the average net salary (50% is assumed percentage of women in the workforce).

See the grim affordability picture globally. Notice the United States remains the 3rd most affordable country for homeownership based on Price to Income Ratio.

Here are the 20 most affordable (lowest Price to Income Ratio):
And the 20 least affordable:

US average home price is 4 times average household income. In Ghana, it’s over 100 times average household income! Developed Western countries dominate the top 20 and the bottom 20 are primarily in Asia and South America. A couple outliers I found interesting: Hong Kong, China and South Korea. Three Asian superpower nations still have very high housing costs. Southeast Asia has low affordability generally (Taiwan, Indonesia, Thailand, Vietnam). Either the income is low in these developing countries, homes are extremely expensive or some combination.

Everyone Has a Take

The rising cost of homeownership is hot now and everyone has a take:

  • “We are due for a housing price collapse.”
  • “Prices will continue to rise in this country at about the same pace.”
  • “Renting is better than owning due to greater flexibility.”
  • “Renting is better than owning because you can invest the monthly savings.”
  • “Owning is better than renting because you have greater freedom to make changes.”
  • “Owning is better than renting because you gain the appreciation.”

The purpose of this article is not to debate differing opinions, but rather examine the situation with data. There exist various compensating factors such as job situation, area of the country or world you live in, family size etc. Review this data in conjunction with other factors specific to you. In this article we’ve analyzed house ownership affordability over the last 10 years (different than just price) in the US and how it compares to the rest of the world.

Stay tuned for the next article as we take a deeper look into Payment to Income ratio from a financial independence vs. traditional perspective. If you are a homeowner, I encourage you to use the calculator to see where you stand on this important ratio. If you’re considering a home purchase, estimate your projected Payment to Income ratio.

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