1: The home price to median household income ratios in the US and UK are near long-term highs. This broad measure of affordability is elevated (i.e. home prices are expensive relative to incomes) but doesn’t account for interest rates.
Today, the 30yr fixed rate mortgage average in the United States is under 3%. In 2006 - when the home price to median income ratio was about the same - the 30yr fixed rate mortgage average was almost 7%. Lower rates mean lower monthly mortgage servicing cost, somewhat offsetting the higher home price to median household income ratios.
2: Some housing markets around the world are more stretched than others. Housing in Canada is possibly the most bubbly in the world, far beyond the reach of many residents. Based on median incomes, in Vancouver it would take 36 years to save up for the minimum down payment. In Toronto it would take 28 years.
3: For the housing market to return to its historical norm, either home prices decline, median incomes rise or both. Unfortunately, there remains tremendous pressure on median incomes - especially with respect to less skilled labour.
The chart below shows the growing use of robots during the pandemic to augment or replace human workers in various sectors.