Chicago Federal Reserve senior economist Richard Rosen has suggested that with rising incomes and low interest rates housing is more affordable than it was ten years ago.
Rosen has created a “mortgage servicing index” that correlates the ratio of a mortgage payment for an existing single-family home at the national median price to the median household income. Using this index, consumers paid 20 percent of their household income for a home in the mid 80’s with just 15.8 percent in 2004.
Bubble? Housing more affordable, study says [Chicago Tribune (06/01/05); Umberger, Mary; Fitzgerald, Alison]