From the NY Times yesterday, comes a surprisingly confused article arguing that home ownership has actually gotten less expensive over the last 20 years. Here’s the article’s upshot (and the part that contains the fishy reasoning):
Nationwide, a family earning the median income – the exact middle of all incomes – would have to spend 22 percent of its pretax pay this year on mortgage payments to buy the median-priced house, according to an analysis by Moody’s Economy.com, a research company… it remains well below the levels of the early 1980’s, when it topped 30 percent.
But median family incomes ain’t what they used to be—and comparing family incomes over more than two decades is a case of comparing apples to oranges. To wit: family incomes today are much more likely to include two incomes (even two full-time incomes) than they were in the early ’80s when many families were supported by a single primary breadwinner. So—to be overly simplistic with the data for a moment—22 percent of two incomes buys what 30 percent of just one income used to.
The good news here is that the share of women in the labor force has been steadily rising, as has the share of women working full time. Women are also steadily closing the pay gap with men. And because women earn more advanced degrees than men, there’s reason to believe the gap may close or even eventually reverse. But the bad news is that families now commonly must employ both adults to make a grab for the brass ring of home ownership. Among other problems, that means substantially less wiggle room in family budgets because if one of the two wage earners falls on hard times, there’s no one who can enter the workforce to help pick up the slack.
And there are at least two other glaring problems with the NY Times reasoning.
Family income is a lousy metric to begin with. Because more and more Americans are delaying marriage (the percentage of unmarried 30 to 34-year-olds has quadrupled since 1970), a smaller and smaller share of us are counted in the family income statistics. This means that the growing ranks of single Americans are facing homeownership with just one income at a time when two are needed.
The Times article also includes a nifty map depicting places where home ownership has gotten more affordable. The curious thing about the map though is that it doesn’t appear to say what the writer thinks it does. According to the map, pretty much the entire states of Washington, Oregon, California, Nevada, Hawaii, Florida, New York, New Jersey, Delaware, and Maryland have gotten more expensive. So have the Chicago and Boston areas, along with much of Virginia. So even by the Times’ rather lousy definition of affordability, a huge swath of the most populated parts of the country have actually gotten less affordable.
To cap it off, the article smirks that the hoi polloi don’t really understand their own economic conditions:
In a nationwide New York Times/CBS News poll conducted this month, 75 percent of respondents said they thought most families in their community spent a larger share of their income on housing now than in the 1980’s. Only 5 percent said the share was smaller.
The lesson for me is that—at least in this case—it’s the people who are right and it’s the data analysts who don’t seem to understand the economy—or even what their data actually means.
UPDATE 1/3/06: Cleaned up some of the typos and atrocious grammar plaguing the first draft.
