Since 1975, home prices (yellow) and inflation (red) have continued to skyrocket, while real wage growth (green) has remained mostly stagnant, according to data from the St. Louis Federal Reserve
"Low mortgage rates are helping home affordability to some extent, but the key ingredient – which has been missing to this point – is substantial income growth," said Mike Sante, managing editor of Interest.com. "Millennials, in particular, are struggling to overcome their student loans and save enough money for a down payment."
During the midst of the financial crisis, home price growth took a dive, falling behind wage and inflation growth. However, the decline was short-lived, and home price growth soon began to outpace wage and inflation growth. (Click on the circle beside by each year to view different data.)
According to a recent Interest.com report, a median-income household can only afford an average-priced home in 10 of the 25 largest U.S. metropolitan areas, according to a Interest.com report. Below represents the percentage of households in an area that exceeds (yellow) or falls short (red) of the income requirements to buy a median-priced home.
Rising home prices and stagnant wages have cemented a system where more and more household disposable income is going to housing, something that is unsustainable.