On the housing prices

Today I want to talk about one simple economic phenomenon that calls my attention.

Similar to what you can read on this article, the following shows a simple table with the median price of a house in the US in different periods of history, the median income, and the expected years it would take to pay for that given median house with that given income, supposing one dedicated 60% of the income into paying for the house, adjusting for some annual interest rate, which for simplicity I place at 20%

YearMedian house priceMedian incomeYears to pay
with 40% savings
1940$2,938 $956 9.2
1950$7,400 $2,990 7.4
1960$11,900 $4,970 7.2
1970 $17,000$8,734 5.8
1980 $47,200$17,710 8.0
1990 $79,100$29,9437.9
2000$119,600$55,030 6.5
2010 $221,800$49,445 13.5

Now of course this table is just a simplification, as one has to consider the heterogeneity within states, as well as other factors, like the amenities in the cities, and so on.

But still, I think two interesting questions arise from this simple data:

Is such overwhelming growth of prices with respect to, say, inflation, sustainable across time, or will we observe some sort of backslash in the years to come? This is especially interesting as the population worldwide seems to be decreasing.

Another interesting question is whether the increase in prices is focalized within some networks, as one would expect. And if so, how is it that the effect propagates? To look at this, one would have to start looking outside of the highly populated areas, I suppose.

Food for thought.

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