In the year 2020 a fellow taking in $59,000 could purchase the average American house.
The monetary and fiscal deliriums of the pandemic period were on the simmer but not yet the boil.
Trillions and trillions later... they have boiled into a beautiful inflation.
Here then is our question:
What salary must a fellow fetch to purchase the average American house in 2024?
Your choices are these:
A): $67,000
B): $83,000
C): $106,000
D): $121,000
Have you selected? You will have your answer shortly.
Let us first glance upon the site of both pre-2020 and post-2020 lunacies Wall Street.
Stocks were up and away today. Up and away... specifically... on Mr. Powell's sturdy yet gossamer wings.
The Federal Reserve concluded its March confabulation today. It held its target rate steady.
Wall Street must await its cherished "pivot."
Yet Jerome assured them it is coming. Not even lovely unemployment data will send him veering.
CNBC:
The Federal Reserve held steady on interest rates at the conclusion of its March meeting, and it's sticking with its forecast for three interest rate cuts. During a news conference Fed Chair Jerome Powell noted that a strong jobs market wouldn't deter the central bank from cutting rates...
"Strong hiring in and of itself would not be a reason to hold off on rate cuts," he said, adding that the job market by itself is not cause for concern around inflation. Earlier, Powell said, "an unexpected weakening in the labor market could also warrant a policy response."
Thus stocks were aloft today.
The Dow Jones Industrial Average flew 401 points forward today. The S&P 500 bounded 46 points and the skyshooting Nasdaq shot 202 points skyward.
Gold too heard Mr. Powell's rate cut mumblings. And it took a good $28 jump today.
The 10-year Treasury yield meantime slinked backward some, to 4.27%.
Let us now return to our question:
What salary must a fellow fetch to purchase the average American house in 2024?
Recall that $59,000 was 2020's answer.
Your choices again are these:
A): $67,000
B): $83,000
C): $106,000
D): $121,000
Here is your answer: C.
In 2024 a man must take in $106,000 to purchase the average American house.
That is: He must take in $47,000 greater than he took in four years back.
Zillow:
Home shoppers today need to make more than $106,000 to comfortably afford a home, a new Zillow analysis finds. That is 80% more than in January 2020, showing how the math has changed for hopeful buyers...
In 2020, a household earning $59,000 annually could comfortably afford the monthly mortgage on a typical U.S. home, spending no more than 30% of its income with a 10% down payment. That was below the U.S. median income of about $66,000, meaning more than half of American households had the financial means to afford homeownership.
Now, the roughly $106,500 needed to comfortably afford a typical home is well above what a typical U.S. household earns each year, estimated at about $81,000...
A monthly mortgage payment on a typical U.S. home has nearly doubled since January 2020, up 96.4% to $2,188 (assuming a 10% down payment). Home values have risen 42.4% in that time, with the typical U.S. home now worth about $343,000.
How many Americans take in $47,000 greater than they took in four years back?
We hazard the answer is few. Some do, we concede it. Yet most do not.
Here your editor stands upon the invincible authority of personal experience. His salary has scarcely budged one jot.
The Kobeissi Letter adds:
In other words, the median household income used to be 27% ABOVE the income needed to afford a home.
Now, the median household income is 41% BELOW the income needed to afford a home.
Housing affordability is horrible at best.
If housing affordability is "horrible" at best... what is it at worst?
In seven markets chiefly on America's coasts a minimum $200,000 salary purchases the average house.
Yet perhaps you are an existing house owner. You therefore roll in clover as your house's value has multiplied.
You seek to exploit this happy condition by selling your house at a cutthroat price the purchaser's throat.
Assume you cut his throat and get your price.
You proceed to purchase another house. Yet now your throat takes the cutting.
That is because the rising housing tide has elevated all houses with it.
And what you have gained in your sale you may lose in your purchase.
With the honey come the aloes.
Meantime, the monthly mortgage servicing on your new house may vastly exceed the monthly mortgage servicing on your old house.
You have attempted to get ahead. Yet you have largely stood still. You may have even gone backward.
Here we speak in generalities. Exceptions exist.
Yet is it grand that a man must collar an additional $47,000 than he collared in 2020... to purchase the average house?
We are far from convinced that it is grand.
It is instead in our estimation the product of a fantastical monetary and fiscal derangement.
It would be very nearly impossible under a sane system set to sane settings.
Yet ours is not a sane system set to sane settings.
It is instead an insane system set to insane settings.
And it is manned largely by the insane.
They ricochet off cushioned walls yelling that:
They can repeal the iron laws of economics...
That the addition of water to wine yields not less wine but more wine.
That is, that diluting money's purchasing power yields not less money but more money...
That deficits do not matter. That they are, in fact, benefits...
That sinking the nation into debt will raise it up into wealth...
That raising the prices of life's essentials raises the general economic level...
That negative interest rates are positives.
This is but a sample of the ravings that come issuing from them.
And because of them a man must rake up $47,000 more to purchase a house...
The Daily Reckoning