A signal of the widespread affordability challenges facing prospective buyers in the housing market, research from the Joint Center for Housing Studies (JCHS) indicates the home price-to-income ratio has reached its highest level on record. In 2022, the median sale price for a home was 5.6 times higher than the median household income. For comparison, as recently as 2019, the price-to-income ratio was 4.1.
Among the 100 largest markets in the country, 48 had a price-to-income ratio exceeding 5.0 in 2022, including seven markets with a price-to-income ratio above 8.0. By comparison, 15 markets had price-to-income ratios above 5.0 as recently as 2019 and just five markets had ratios that high in 2000 (Figure 2). With the rapid rise in prices since the beginning of the pandemic, price-to-income ratios have reached all-time highs in 78 of the nation’s 100 largest markets. Only Syracuse had a price-to-income ratio under 3.0 among large markets in 2022. Price-to-income ratios that low were the norm across much of the country in prior decades. Indeed, fully two-thirds of large markets had price-to-income ratios below 3.0 as recently as 2000.
Even with the widespread increase in home prices relative to incomes, price-to-income ratios still varied considerably in 2022. The highest price-to-income ratios were largely on the West Coast, including Honolulu (12.1), San Jose (12.0), and San Francisco (11.3). Outside the West Census Region, the highest price-to-income ratios were along the East Coast in markets with severe and persistent affordability challenges, including Miami (8.7), New York (7.1), and Boston (6.5). Even in more traditionally affordable markets, sale prices climbed to more than four times the median household income. In the Midwest, for example, price-to-income ratios were highest in Madison (5.0), Milwaukee (4.9), and Chicago (4.3). Price-to-income ratios were lowest, but still rising, in many of the Northeast and Midwest markets typically associated with the Rust Belt.
With rising interest rates in 2023 leading to deteriorating affordability, will price-to-income ratios continue to rise? The slowdown in home price growth nationally suggests that rising price-to-income ratios will at least slow, if not decline modestly. However, widespread inventory shortages and persistent demand for housing will likely keep home prices (and price-to-income ratios) historically high, an indication of the growing and persistent unaffordability potential home buyers face.
