A brief excerpt:
One of the metrics we’d like to follow is a ratio of house prices to incomes. Unfortunately, most income data is released with a significantly lag, and there are always questions about which income data to use (the average total income is skewed by the income of a few people).
And for key measures of house prices – like Case-Shiller – we have indexes, not actually prices. But we can construct a ratio of the house price indexes to some measures of income.
House Price to National Average Wage Index
For the following graph I decided to look at house prices and the National Average Wage Index released this morning for 2023 from Social Security.
The National Average Wage Index increased to $66,621.80 in 2023, up 4.43% from $63,795.13 in 2022. This was the third consecutive year with strong wage gains, and wages are up almost 20% over the last 3 years.
The last time we saw 3-year wage gains this high was in the late 1970s and early 1980s. Another reason to compare the current housing cycle to the 1978 to 1982 period (not the housing bubble and bust).
There is much more in the article.