MBA Chart of the Week: Growth in Median Household Incomes, Cost of Living
Historically, growth in the cost of shelter in the U.S. has outpaced the overall cost of living and growth in household incomes.
Growth in shelter (housing) costs is higher than the rate of general inflation for many reasons, including urbanization, which entails more costly construction methods and increased land costs and which drives greater competition for scarce housing resources.
While the Consumer Price Index measure used here adjusts for it, housing costs have also risen as the typical size and quality of homes has increased over time.
Average annual growth rates for income, costs of living and shelter have slowed considerably since 2007. Over the 40 years from 1967 to 2007, the typical household’s income grew at an average annual rate of 5 percent per year. Since 2007, that pace has slowed to just 0.8% per year. At the same time, growth in the total cost of living slowed from 4.7 percent to 1.5 percent annually, while average annual growth in the cost of shelter declined from 5.4 percent to 1.9 percent.
With incomes increasing at half the rate of the overall cost of living and its shelter component, many households are losing ground in their ability to keep up with even the relatively slow growth in those costs. This fact is also demonstrated by the increasing rent burdens of lower income households.
To view the Chart of the Week, click https://www.mba.org/news-research-and-resources/forecasts-data-and-reports/forecasts-and-commentary/chart-of-the-week.
(Lynn Fisher is vice president of research and economics with the Mortgage Bankers Association; she can be reached at lfisher@mba.org. Jamie Woodwell is vice president of commercial/multifamily research and economics with MBA. He can be reached at jwoodwell@mba.org.)
