The Problem of the Median Home Buyer is Nonsense

I have a keen ear for statistical nonsense. Once again, I hear that it's a
great crisis in this country that a person with the median income cannot afford the cost of the median home in his area. This is not only not a crisis, it's something close to a mathematical certainty.

Not quite, because it's not certain that the average person will pay as much for a house as he can afford. Some will buy homes that are well within their abilities, although it is now clear that some others were spending above that level. But for the sake of argument, let's suppose that builders will build enough home at every price level that everyone can find a home at the highest price they can afford, which is not true but good enough to make this point.

However, not everyone will buy a home. Even though in America, there is a very high level of home ownership, there is still a segment of the population that will be unable for economic reasons to own a home. Usually, this is a question of income.

About 31% of housing units are occupied by non-owners. Add to that the number of people who don't occupy any housing, i.e. the homeless, deduct the number who are simply happy renting. For the sake of argument, let's call it 20% who would buy a home if they could but haven't got enough income.

Then the class of Americans who would be buying and selling homes is about 80%. The median among them would buy the median home, which is what they can afford (see assumption above). That would be the median of the top 80%, or the 60th percentile overall.

Consequently, people with the median income among all Americans would be around the 38th percentile of home buyers and would NOT be able to afford the type of home which someone at the 50th percentile of home buyers could afford.

This does not say that there isn't a housing price problem. One of our greatest problems is that when we're in our working years, we think we can "save" for our retirement by buying oversized houses which we expect to sell at still higher rates to the next generation so we can live off the capital gain. It's a national "greater fool" theory.

We need to be living more modestly, perhaps renting more often, and putting our money collectively into roads, bridges, and the like, and individually into productive parts of the economy. We can then leave a legacy to the next generation which will allow them to support themselves and us as well. Creating national wealth by building houses is foolishness.