Homebuying households typically have greater income than non-buying households, and the gap is widening. In 2017, households that purchased a home earned more than 62.7 percent of all U.S. households.
By contrast, the gap in 2012 was 59.8 percent. According to Zillow's analysis, the threshold for being a "typical homebuyer" pushed more than 3.5 million households up the distribution of income. At the national level, the typical homebuyer is fast becoming similar to buyers in the most expensive U.S. metros like Los Angeles and San Jose in California, and in Seattle. The gap between homebuyer household income versus other households ranges from 65.4 percent in Seattle to 72.2 percent in San Jose.
Climbing home values are just one part of the equation. While they have soared 50 percent in the past seven years, household incomes have not kept up, rising just 11.3 percent in real terms ($53,921 to $60,000) from 2012 to 2017. The result is that the ratio of home values to incomes has increased from 2.96 in the third quarter of 2011 to 3.5 in the third quarter of 2018. In other words, the value of a typical home raced ahead by more than half of an entire year’s median income. By this metric, home values have risen to income-adjusted levels last seen in 2008. At that time, prices had risen unsustainably high and were beginning a five-year decline toward their post-crisis trough around early 2012.