Inflating New Home Prices Rising Faster than Median Household Income

After a year’s hiatus with the coronavirus pandemic, median household income began noticeably rising in May 2021. But median new home sale prices are continued rising faster. The following chart shows the newly developing trend in the relationship between median new home sale prices and median household income.

Let’s recap the recent history. After a short spike to reach a record 5.45 times (5.45X) median household income in February 2018, the relative level of affordability of new homes in the U.S. improved after that point, bottoming at 4.88X in May 2020. A surge of demand after May 2020 has fueled inflating new home prices, which have risen to 5.38X median household income as of July 2021.

Which is to say that new homes are becoming less affordable for the typical American household. The following chart shows the current declining trend for affordability:

We’ll report our estimate for median household income for July 2021 on 1 September 2021.