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Buy a House v Median Income
Analysis: The chart illustrates the percentage difference between the income needed to buy a house and the median income from 1965 to 2025. The data highlights periods when housing was affordable (blue bars) or unaffordable (orange bars) relative to household incomes. Housing affordability has worsened due to rising home prices, increasing mortgage rates, and stagnant wage growth. A projected gap of 31.3% in 2025 indicates housing is highly unattainable for median-income households.
So, how much income is needed to buy a house? Approximately $109,564.
If buying a house remains “unaffordable” for the median household, they will likely be forced to rent.
134-Year Average of Mortgage Rates
Analysis: The long-term average mortgage rate is 6.4%, closely aligned with the current 2024 rate of 6.7%. While this suggests that rates are not historically unprecedented, the sharp increase from pandemic lows (3.0%) to 6.7% represents a rapid change that has disrupted the housing market.
I hear many people discussing the idea of 'waiting' for interest rates to decrease. However, considering historical averages, it seems unlikely that rates will drop significantly. The question is, how long will they be willing to wait?
Value-to-Income for Sioux Falls
Analysis: This chart takes the typical home value in Sioux Falls divided by the median household income. The black dotted line represents the historical average ratio, which is roughly 3.25. However, since 2017, the ratio has gone above the average and continued even higher.
Sioux Falls’ Resiliency
Analysis: This chart compares Sioux Falls' stable homeownership rate with the fluctuating 30-year mortgage rates from 2005 to 2023, highlighting trends in affordability. Recent years show rising mortgage rates alongside a slight increase in homeownership, indicating resilience in the local housing market.
It will be interesting to see if the homeownership rate in Sioux Falls remains strong through an extended period of higher interest rates.
Interesting News
Baseball player getting paid $78,703 per at-bat for the next 15 years
A septillion-year problem solved in 5 minutes - Google’s Willow Chip
Sioux Falls Airport planning a 14-gate expansion
Have a great week!
Sincerely,
Brent Zomer