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A look at real housing prices and incomes: some implications for housing affordability and quality

  • Joseph Gyourko
  • Joseph Tracy

This paper was presented at the conference "Unequal incomes, unequal outcomes? Economic inequality and measures of well-being" as part of session 2, " Affordability of housing for young and poor families." The conference was held at the Federal Reserve Bank of New York on May 7, 1999. The authors report that the cost of good housing has risen for low-income individuals. The National Association of Realtors affordability index shows that affordability conditions are better today than at any time in the past twenty-five years. However, Gyourko and Tracy's analysis suggests that this finding may not hold for low-skilled workers at the bottom of the income distribution. The real incomes of these households have not fully recovered to the levels reached before the 1990-91 recession, yet the constant-quality price of the housing bundle they typically consume has continued to rise in the 1990s. Therefore, to afford a single-family home, these households must be increasing the number of hours worked or shifting down to lower quality housing.

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File URL: http://www.newyorkfed.org/research/epr/99v05n3/9909gyou.pdf
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Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (1999)
Issue (Month): Sep ()
Pages: 63-77

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Handle: RePEc:fip:fednep:y:1999:i:sep:p:63-77:n:v.5no.3
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  1. Lawrence D. Jones, 1989. "Current Wealth and Tenure Choice," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 17-40.
  2. Crone, Theodore M. & Voith, Richard P., 1992. "Estimating house price appreciation: A comparison of methods," Journal of Housing Economics, Elsevier, vol. 2(4), pages 324-338, December.
  3. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 50-58, February.
  4. Joe Peek & James A. Wilcox, 1991. "The measurement and determinants of single-family house prices," Working Papers 91-7, Federal Reserve Bank of Boston.
  5. Gruber, J., 1992. "State Mandated Benefits and Employer Provided Health Insurance," Working papers 92-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Patric H. Hendershott & Thomas G. Thibodeau, 1990. "The Relationship between Median and Constant Quality House Prices: Implications for Setting FHA Loan Limits," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 323-334.
  7. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
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