Where the House-Price-to-Income Ratio Is Most Out of Whack

The rule of thumb long used by real estate agents and homebuyers is that you can afford a house if its price is equivalent to roughly 2.6 years of your household income. That ratio is based on historical nationwide averages under healthy economic conditions. But today, in many places around the country—particularly in coastal cities in California and along the New York–Boston–Washington corridor—housing has become staggeringly more expensive than that.

To get a sense of just how much more expensive, my colleague Charlotta Mellander and I looked at the number of years of median income it would take to buy a home in U.S. metropolitan areas. This metric helps us better understand the relative cost of housing compared to incomes. We used data on median housing values from Zillow and on median income (for households and individuals) from the U.S. Census Bureau’s American Community Survey.