A recent trend on social media has been comparing the house buying power of today to what it was in the 1970s. Often, this discourse comes as a response from young adults as their elders question why they have not yet reached the milestone of becoming a homeowner. However, the housing market is not quite what it used to be, which is supported by many different articles and studies.
In the 1970s, the average cost of a home was $25,000 and the minimum wage was $1.60, working 14,375 hours (about one and a half years) to do so. Working the same number of hours, the calculated minimum needed to be made is anywhere from $29/hour to $66/hour to buy a house that costs around $420,000.
Those numbers vary drastically, yes, but so do home prices state-to-state and city-to-city, on top of the varying costs of different regional lifestyles.
However, some of that difference is offset by the difference in home mortgage rates. At present, the average interest rate is six percent with the high end being in the low seven percent range. Meanwhile, interest rates in the 1970s were in the double digits.
Something that counteracts even that difference is, while the median home price was 3.2 times the median income, that number reached a record breaking high of 5.83 in 2022. While it did lower some in 2023, it is still twice as high as it was in the ‘70s.
The median household income for a household in the years 1970-1979 was $58,851 a year. In 2023 alone, the median income for a household is $80,610. And yet, the median price of a home has doubled when the median yearly household income has only risen by about $30,000. Not to mention those numbers from the ‘70s were based on an average of one income while the modern average is about two.
It is not that young people do not want to own a home, or that they are not trying hard enough. It has everything to do with the economy, the housing market, and interest rates making prices rise higher than wages can keep up with.