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Real Estate Prices vs. Income

Crews Bank & Trust Wealth Management Services Mar 30, 2022
chart shows that In the past, an average house in the U.S. cost five times the yearly household income (aka our labor). As of November 2021, that ratio was 7.5 times

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Real estate is unique since humans need a physical place to live and work. Economics says the price of those physical places is constrained by the cost of the physical labor to build them.

In the past, an average house in the U.S. cost five times the yearly household income (aka our labor). As of November 2021, that ratio was 7.5 times, exceeding the record set in 2006 at 7.0 times.

The past is no predictor of the future, but in the physical world, we know that the ratio has a limit. So, what is that limit? Is it the 7.5, which results in a the current median family income of $62,000 paying $465,000 for a house? Can it go to 10 times and $620,000 for a house, or 15 times and $930,000 for a house? Most likely not. And the higher the ratio goes, the more “perfect” our economy has to be to sustain the record high house prices.
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Crews Bank & Trust Wealth Management Services
Crews Bank & Trust Wealth Management Services

Experienced professionals from our wealth management services team can help you achieve a bright financial future through investment strategies tailored to you. We’ll show you all of the options available and help you choose the ones best suited to you. We’ll provide high-quality, personal service as we work toward your goals together. Our Portfolio Managers do not receive commissions on trades; our recommendations of investments are based solely on your best interests.

Investments are not a deposit or other obligation of, or guaranteed by, the bank, are not FDIC insured, not insured by any federal government agency, and are subject to investment risks, including possible loss of principal.

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