Why Do Homes Cost So Much More Than We Earn?
Updated: 14 hours ago
Short Answer: The gap between home prices and incomes is near historic highs, though it has eased a bit since the 2022 peak.
In September, the national median price of an existing single-family home was $422,700 (NAR). Median U.S. household income for 2025 was about $87,460 (U.S. Census Bureau). That puts the price-to-income ratio at about 4.8 to 1.
For most of the late 20th century, that ratio ran between 3.0 and 3.8 (Harvard’s Joint Center for Housing Studies). In 2022, it topped 5. Since then, incomes have grown faster than prices, but homes are still far more expensive relative to pay than they used to be.
So how did prices get so far ahead of incomes? There were two forces at play: more than a decade of underbuilding, followed by ultra-cheap money.
How We Got Here
1. A Decade of Underbuilding
After the 2008 financial crisis, homebuilding collapsed and didn’t return to normal levels for more than a decade. Builders went under, skilled workers left the trades, and local zoning rules, such as single-family-only zoning and minimum lot sizes, blocked denser housing.
Meanwhile, new households kept forming. Year after year, we built fewer homes than population growth required, and the shortfall grew into a deficit of millions of units.
2. 3% Mortgages
When mortgage rates fell toward 3% in 2020 and 2021, buyers could suddenly afford much higher prices for the same monthly payment. With so few homes for sale, they bid against each other, and national prices rose more than 40% between 2020 and 2022.
Cheap money lit the fuse. A housing shortage is why prices didn’t come back down.
3. Incomes Fell Behind
Wages grew solidly during those years but nowhere near as fast as home prices. Incomes have been catching up since 2022, slowly. At this pace, closing the gap will take years.
Why 7% Rates Haven’t Brought Prices Down
In a typical cycle, rising rates push prices down by shrinking what buyers can afford. This time, prices have held up because of the lock-in effect.
About 66% of homeowners with a mortgage have a rate below 5%, and about 49% are below 4% (FHFA). Few want to trade a 3% mortgage for a 7% one, so they stay put. That keeps inventory tight enough to prevent big price declines, even as sales have fallen to multi-decade lows.
(For more on inventory and where prices are headed, see Will Home Prices Go Down in 2027?)
The View from Seattle
In King County, the ratio is far worse. A median single-family home of about $949,975 against median household income of about $130,000 puts the ratio near 7.3 to 1. For a typical household, buying a typical home is out of reach.
Local conditions make the national problem worse:
Limited land. Water, mountains, and growth-management boundaries limit where we can build.
Slow, costly permitting. Complex land-use rules and long permit timelines add cost to every new home.
How Do We Fix It?
At its core, this is a supply problem.
Higher incomes and lower rates help with monthly payments, but they don’t fix a shortage. Lower rates without more homes just unleash pent-up demand and push prices back up.
Washington has started to act. HB 1110 (2023) requires many cities to allow middle housing like duplexes, fourplexes, and townhomes on lots once zoned only for single-family homes, and HB 1337 made it easier to build accessory dwelling units. ADUs have been a success story. Middle housing has been slower. In neighborhoods that are already built out, a builder usually has to buy an existing home, tear it down and rebuild. That makes the land expensive, and in many cases the numbers just don’t pencil.
The long-term path back to affordability still requires:
Zoning that allows more multifamily and middle-density housing, and cities that implement it quickly.
Faster, more predictable permitting and lower regulatory costs.
Training programs to rebuild the construction workforce.
Watch the Full Breakdown
Video: The Great Disconnect. How the gap between home prices and household incomes has widened over the past 50 years, and what it means for the future of housing.
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