King County Affordability: 1950-2007

When I posted last week’s 61-year home price history, I promised a follow-up on affordability. So, here it is.

Before I get to the chart, here’s a quick refresher on what the “affordability index” is, and what it isn’t. What it is is a simple measure that shows relationship between median home prices, median household incomes, and interest rates. It is calculated by determining the monthly payment (principal and interest) that would result from buying the median-priced home, assuming a 20% down payment and current interest rates on a 30-year fixed-rate mortgage, then comparing that to 30% of the monthly median household income (the standard measure of “affordable housing”). Thus, an affordability index of 100 means that the median household would pay exactly 30% of their monthly income toward the mortgage of the median-priced house. Above 100 is more affordable, while below 100 is less affordable.

The affordability index does not take into account lending standards or exotic mortgage availability. It also does not necessarily indicate that an area is overpriced if the affordability index is below 100. More desirable areas are inherently less affordable. No reasonable person would expect housing in Bismark, ND to have the same affordability index as New York, NY. What is somewhat instructive however, is comparing the affordability index of a given area to that same area’s affordability index in the past. How convenient then, that this is exactly what we are doing with this post.

What you see below is a graph of the Affordability Index for King County from 1950 through 2007. For ease of reference, I’ve overlaid the graph of inflation-adjusted home prices on the right axis, so you can see how the two relate. I want to note though, that when calculating the affordability index, actual home prices are used, not inflation-adjusted prices.

King County Affordability Index: 1950-2007
Click to enlarge

From 1950 to 1970, while home prices more or less just kept up with inflation, affordability was sky-high, reaching peaks as high as 227. Of course, it shouldn’t come as a real surprise that when home prices began to jump up in the mid ’70s, affordability dropped like a rock. Of course, home prices are only part of the equation. Affordability tanked from 1976 to 1981 not only due to a leap in home prices, but an even more extreme spike in interest rates. On the following graph you can see the other two components of the affordability index: median incomes and interest rates.

King County Incomes & Interest Rates: 1950-2007
Click to enlarge

I should point out that pre-1971 interest rate data is quite difficult to find, and I was forced to make my best estimate based on a chart of 30 Year FHA Mortgage Rates. Also, I believe that sometime during the period that is displayed on the graph, the “standard” mortgage shifted from a 15-year to a 30-year term. I couldn’t locate any data on historical mortgage standards to back that up, but maybe one of our resourceful readers can. Even with the ridiculously high interest rates of the early ’80s, the long-term average of the affordability index through the ’80s and ’90s comes out to 101.9. Here are the averages for each decade since the ’50s:

  • 1950s: 160.6
  • 1960s: 194.6
  • 1970s: 178.4
  • 1980s: 97.4
  • 1990s: 106.5
  • 2000-2007: 89.7

The affordability index for 2007 stood at 72.5, which is 29% lower than the 1980-1999 average. To get back in line with long-term trends, the affordability index would have to increase by approximately 40%. This could happen through increasing incomes, falling home prices, or falling interest rates. Lower rates seems fairly unlikely, so I’m predicting that it will be some combination of the first two, with the emphasis on the falling home prices.

This analysis may remind you of Deejayoh’s excellent post that compared disposable income, interest rates, and home prices from 1985 through 2007. The data is slightly different, but the conclusion is largely the same. Today’s home prices are seriously out of whack with long-term trends.

(Home Prices: see this post)
(Household Income: US Census Bureau)
(1950-1970 Interest Rates: Financial Forecast Center)
(1971-2007 Interest Rates: Federal Reserve)

0.00 avg. rating (0% score) - 0 votes

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    AndySeattle says:

    Cheers on the data… Easy to consume!

    But I gotta ask… How long until you write a calculator for us to plug in some values so that we can customize what affordability means to our individual circumstances?

  2. 2
    vboring says:

    40% to catch up with what long-term affordability trend? it’d be good to plot that.

    also, the median household income seems a bit too stable. you’d think the tech bubble days would have caused at least a small bump or inflection point.

    but yeah, with inflation over 4%, it seems unlikely banks will be lending their money for less than 6% anytime soon.

    i wonder how many of the region’s household incomes have a cost of living adjustment tied to the CPI, guaranteeing that they will keep up with measured inflation (with a 1 year lag)?

  3. 3
    Buceri says:

    Wow; even in 2007 US pesos. Logging was paying pretty good back in the 50s…

  4. 4

    Any reason why this area will or should or shouldn’t revert to the mean as far as the affordability index?
    I came to Seattle 31 years go, and it was very attractive then to poor hipsters longshoremen, and assembly line widget makers, but it didn’t pretend it was ” World Class”. I’m NOT saying Seattle is special, in fact I liked it a lot more 30 years ago when downtown had more pawn shops and dive bars, but cities do change, and I would imagine that as a place is considered more desirable by people with money, it’s affordability rate would decrease.
    On a slightly different note, I was changing planes last week in Minneapolis and overheard two people talking to each other with that thick accent. One was saying ” Minneapolis is just to lively for me. I prefer Bismarck.”

  5. 5
    vboring says:


    the point of looking at affordability is that it takes incomes into account. if incomes double and so do house prices, affordability doesn’t change.

  6. 6
    rentfornow says:

    Any way to work in avg. price per square foot? I am not sure that it would make any significant difference, but homes have gotten much larger.
    Keep up the great work.

  7. 7

    Incomes have risen substantially in Seattle, but home prices have risen much more than the income levels.
    Shooting off the top of my head without any knowledge ( something I’m good at):
    A place like Bismarck ND or Detroit is not going to have seen the same rise in income level as Seattle, and consequently a much lower home price rise..I’m not saying home prices are reasonable here (they’re not) or that home prices won’t fall here ( they will) but…would it also be true that in cities that did see large income increases over the last 30 years ( San Jose?) that the home prices, like Seattle’s, got all out of whack, disproportionate to the rise in incomes?

  8. 8


    You really should call family household income is about $66K average. The average “household income” in King County is a lot lower, its $53K.

    Redo your chart Tim. From what I can see at school bus stops, there’s more kids living in apartments than SFHs, but spread evenly is a good assumption. To say only family incomes are potentially in the housing market is totally absurd, its evenly spread, ask a realitor.

    Here’s the URL to straighten your chart out:

    which states in part:

    “….The median income for a household in the county was $53,157, and the median income for a family was $66,035. Males had a median income of $45,802 versus $34,321 for females. The per capita income for the county was $29,521. About 5.30% of families and 8.40% of the population were below the poverty line, including 9.40% of those under age 18 and 7.40% of those age 65 or over….”

    I see the State of Washington used those meaningless “way too high” average family income [what the Hades does a family mean anyway, vs. a non-family?] figures as average household income numbers in error too….its all State of Washington cow manure to put lipstick on the cash-strapped pig that doesn’t qualify for a home.

  9. 9
    The Tim says:


    The $53,157 figure you quote was from the 2000 Census, and is accurately reflected in the above chart. Data since then comes from official King County estimates, and as you can see, tracks the growth curve fairly closely.

  10. 10
    Sniglet says:

    The affordability information is interesting, but I don’t think it gives us a good grasp of how “at-risk” our market is. As I’ve mentioned before, what would really be helpful is to see the percentage of various mortgage products used over time. It would also be interesting to track the percent of homes that had 5% or less of equity over time.

    The depth of the Puget Sound real-estate bust will be determined by how many people have a good cushion of equity (compared to past times), and will thus be able to avoid foreclosure if they run into trouble.

  11. 11
    Ray Pepper says:

    Just came back from listening to Governor Gregoire @ The Tacoma-Pierce County Assn of Realtors. First I must thank TPCAR for allowing me to come and listen for I have never been a member.

    I chose to leave swiftly after the Q and A and didn’t eat lunch. In fact the Governor was the only one who beat me to the exits. What did I get out of it?

    Exactly what all of you who missed it would think happened. No substance. All rhetoric with some comedic moments on Washington wines. The ports are strong, housing will remain strong due to our economy, and we should be very very fortunate to live here.

    As I drove off I was asking myself what was I expecting? ………I just got a call from a fellow realtor who was also at the meeting. He stated I missed the best part. Apparently trhe ASSN preaches to “save our commissions” and not to lower them. I now wish I stayed. It may have been funny.

    Ray Pepper

  12. 12
    The Tim says:

    I was thinking more about the 15-year vs. 30-year question, and I decided to make another graph, where 1950-1979 the index is calculated using a 15-year mortgage, and 1980-2007 it uses a 30-year mortgage. Here’s the link.

    Using that version, the peak affordability was much lower, at 171.4 in 1973. The average for the ’50s was 108.3, the ’60s was 139.1, and the ’70s was 140.4.

  13. 13
    vboring says:

    it seems to me, the depth of the correction is determined by how unaffordable things are, while the pace of the correction will be determined in part by how overextended individuals are as a result of using non-traditional loan products to “buy” too much house.

    if a large number of foreclosures and short sales don’t happen here, we may just have stagnant prices for several years until inflation catches incomes back up to historical affordability levels.

    if there are a large number of foreclosures, the correction will be much faster, and we’ll see significant nominal dollar price declines.

    so, yes, i agree that the billion dollar question is: how many foreclosures will King county see and when?

  14. 14
    Bits_of_Real_Panther says:

    Bismarck and El Paso are more affordable than San Francisco and Manhattan, and median income explains only part of it

  15. 15


    There’s a 2000 Census reference above it, but the Wiki reference for King County is updated through 2007….we both have valid points (I’ll give you the strongest).

    Here’s another household income source for King County:

    It states in part:

    “….Median household income in 2005: $58,370
    2005 median house value: $345,300
    Median contract rent in 2005: $762
    Median monthly housing costs in 2005: $1,141
    Estimated median household income in 2005: $57,205 ($53,157 in 2000)

    This county $57,205
    Washington: $49,262…”

    Your chart shows $60K for 2005, a much higher slope to 2007 from 2000, albeit it agrees with your 2000 $53K assumption.

    I don’t trust any statistical sources, they’re error prone and they error on the side of their caution to sell us stuff.

    You do good work Tim, don’t get me wrong. The numbers simply seem weird. How can per capita incomes be like $30K average in King County, yet there’s 30%-50% people living alone (see Seattle Times URL below and more single women than married) with apparently $30K average household incomes. The $60K+ figure doesn’t add up per King County household with almost half making about $30K per capita worker in a household by themseves.

    The article is from the 2000 census, bit believe me, there’s more singles today than 2000, at best its unchanged at 2007.

  16. 16
    JP says:

    Really nice view of the data, Tim. It’s clear that King County home prices have grown less affordable to folks with the median income.

    However, from what you present, I do not necessarily conclude that “Today’s home prices are seriously out of whack with long-term trends.”

    I’m skeptical that the median income is a good stand-in for the income of people who buy/own homes in King County. It may be, but I’m not sure.

    Evidence that could point more strongly to your conclusion:

    1. Affordability numbers for the “home buying/owning” segment of the population (i.e. use the median income of that population)
    2. Size of the “home buying/owning” segment of the population, relative to the number of housing units in King County.

    Where to get that type of data? Or approximate it? What happens if you run the affordability numbers for the income at different percentiles (60,70, etc)?

  17. 17
    B&W NIkes says:

    Awesome research and charting. The funny thing about median price of anything and the real estate industry is that if the numbers support good news they can be quite valid and if they indicate negative news they are not even relevant to the question. Even good old Washington Realtor™ and WSU’s WCRER freely admit: “that the typical would-be homebuyer has a little over half the income needed to qualify for a mortgage on the typical starter home” in their own press release oddly titled Washington Home Sales Tumble, Median Home Price Slips, but Housing Affordability Improves. They are basically saying the same thing that is said here, but are trying to hide the arsenic in a typically tasty treat. I’ll continue to put more stock in TimCo’s far less contradictory research and presentations.
    This “buying class” meme that keeps serfacing to dodge historic price relationships… it’s a poorly lobbed herring that should lead one to the conclusion that the “buying class” is shrinking and that cul-de-sacs in the same answer presented repeatedly here: the product is too expensive.

  18. 18
    Herman says:

    I have to think that there is another trend driving up prices — which is the total investment in home building and improvement in this area. I am sure that developers and homeowners have poured money into their property at an unprecedented rate here recently. Case-Shiller factors some of this out but not all of it; teardowns are supposed to be filtered, but kitchen remodels and less radical improvements are surely not factored out.

    Home “inflation” = [Price changes – Investments] Right?

    I think we’re ignoring an important variable by neglecting investment data.

    You might say that it’s a zero-sum issue, that people will pay what they can afford. But I think people in recent years have been buying *nicer* homes than they were years ago. Bigger, newer, and with better finishes. Doesn’t that mean people will stretch more and pay more, feeling like they’re getting more value for their money?

    So, maybe another factor of prices coming down is slowing of the investment rate and aging of the housing stock.

    Think about it.

  19. 19
    david losh says:

    It seems 1995 was the year things began going out of wack. What I remember is being in an airpost in France and seeing Windows ’95 ads all over the place.
    What I also rememebr is that these were the years of the information super highway, International market were opening, NAFTA was a big push, Russia was a trading partner and Communist China left Hong Kong pretty much alone; against all convenienal wisdom.
    In a phrase these were the years of the Global Economy. Money flowed like water, millionaires were made over night, and the United States was the Mecca of Capitalism. Dollars traded against Yen, Pounds, and Duetchmarks. The world sure has come a long way since then.
    When you look at the Real Estate market, such as Downtown Manhattan, or San Franscisco, there was tons of appreciation that has since spilled over into other areas. Look at las vegas, or New Jersey in terms of the investments there. Seattle came very late into play, but it did. Huge sections of the United States are controlled by foriegn investors that really have little use for the United States at this point. The rise of the Euro kind of leveled the playing field in many respects.
    In my opinion what we are seeing right now is that money is moving away from the United States and into other investments.

  20. 20
    AndyMiami says:

    What is happening is not just about Seattle, please take a look at Noriel Roubini’s testimony 2 days ago in front of CONGRESS…

    The best quote is..

    it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt. Thus some big banks may join the 200 plus subprime lenders that have gone bankrupt. This, like in the case of Northern Rock, will lead to depositors’ panic and concerns about deposit insurance. The Fed will have to reaffirm the implicit doctrine that some banks are too big to be allowed to fail. But these bank bankruptcies will lead to severe fiscal losses of bank bailout and effective nationalization of the affected institutions. Already Countrywide – an institution that was more likely insolvent than illiquid – has been bailed out with public money via a $55 billion loan from the FHLB system, a semi-public system of funding of mortgage lenders. Banks’ bankruptcies will add to an already severe credit crunch.

    And today our fearless Fed leader….

    Federal Reserve Chairman Ben Bernanke said that some small U.S. banks might go under during the current stress prompted by housing market problems, but the U.S. bank system overall remained solid.

    “I expect there will be some failures,” Bernanke told the Senate Banking Committee, referring to smaller regional banks who became heavily invested in real estate.

    OK, whacked out NYU professor predict doom, but our Fed chief admits to bank failures, even if you go down the middle…WAMU is KAPUT..

    Yes, Seattle will never be impacted by these macro events….

  21. 21
    mikemcc says:

    How do these stats take into effect the changes in basic lifestyle choices of the last 20 years vs. the 1950’s – 1970’s?

    1950s – 1960’s 1 bath was typical, by the later 1960’s 1.5 baths, and by the late 1970’s 1.75 baths with an unfinished basement. Our median square footages are larger today as well.

    Today we all have 2.5 baths or more. 1950-s – 1970’s families had 1 car, not 2 or 3 or 4, and they had 1-car garages or carports, not 2-car garages.

    People owned 1 house then if they were lucky; no rentals and rarely any vacation homes.

    Our debt is high today, but our demands for a “higher” standard of living is much higher today than then. I’d guess if true comparisons were made, we’re spending more but getting more, with the empasis on debt being the risky difference. We’re not able to compare apples to apples, one or two apples have become a crate of apples …

    I don’t see any way for these changes to correctly reflect via these stats or charts.

  22. 22
    economist says:

    but yeah, with inflation over 4%, it seems unlikely banks will be lending their money for less than 6% anytime soon.

    Banks don’t lend their money, They loan Other People’s Money. Those Other People being the Chinese, Arabs, Norwegians, etc. Who have been taking big haircuts on Wall Street’s trash and are going to want a higher interest rate. Which means higher rates for loans.

    we may just have stagnant prices for several years until inflation catches incomes back up to historical affordability levels.

    You think incomes are going to keep pace with inflation? This isn’t the 70’s. Back then the US had things called “unions” and “manufacturing”. Oh BTW, if we’re going to get 70’s inflation, we will soon see 80’s interest rates.

  23. 23
    JP says:

    B&W NIkes – Since I’ve been accused of herring-tossing, I’ll try to make my point again. It’s really quite a narrow one.

    Tim clearly demonstrates that

    1. King County housing has grown less affordable for a certain class of people, those with the median income.

    Then he predicts that

    2. Housing prices will fall and/or income will rise.

    However, I think you will note that he does not explain why 1 implies 2. I’m interested in hearing that explanation.

    I like this site because I think that the analysis presented by Tim and others is quite good. I’m just pointing out that in this case I see a logical leap in the analysis that I think can be filled in.

  24. 24
    local Realitor says:

    Aaargh….my REI refund is small this year. Enough to buy a key chain or water bottle.

  25. 25
    lilblackbird says:

    “1950s – 1960’s 1 bath was typical, by the later 1960’s 1.5 baths, and by the late 1970’s 1.75 baths with an unfinished basement. Our median square footages are larger today as well.”

    Those older tiny houses are still out there, benefiting from the run up in prices as well as the newer, larger models. They are now touted as great townhouse or condo alternatives. Even better, the basement and sometimes attic are claimed as usable space and included in the sq ft on MLS. Many, many of the houses I have seen have double the space reported in their ads as the county records. And I haven’t looked at more than a half dozen places with a 2 car garage. Most have driveway parking, because if there was a detached garage, it’s a family room, now baby!

    Aside from that, someone earlier mentioned that the lot you get now is only a small portion of what you would have gotten 20-50 years ago. Land is more than half of the value of most King County properties nowadays…

  26. 26
    deejayoh says:

    However, I think you will note that he does not explain why 1 implies 2. I’m interested in hearing that explanation.

    JP – you may want to look back at the analysis I did which Tim referenced above. It compares the indexed change in home prices with total disposable income/interest rates – not per person, but total in the state. That kind of isolates the median/average issue from the argument. As you point out, most of the increase in total disposable income is probably at the upper tiers, but then – so is the home ownership

  27. 27
    rose-colored-coolaid says:

    In reference to #11.

    Ray, I’m intrigued by the statement about ‘saving commissions’. Are the realtors associations actually lobbying at the state level to have their commissions protected? If so, that goes beyond their typical racketeering. Please share more on this topic.

  28. 28
    mikemcc says:

    Yes, the houses are still out there with one bath, or even a garage finished. What I’m saying is that the people who lived in them in the 1950’s, 1960’s had one car, or no car, 3 kids and lived in those homes in a much more simple way that we do today. By the 1970’s a lot had moved to suburbs with the bigger split level homes, and unfinished basements. More space maybe, but still no real frills, no bells and whistles.

    Did you see Aubreys post on the ‘cutest home in Ballard’? Darned cute. And in it’s beginning I’m sure it housed a couple with 1 or 2 kids, yet today it is being touted as for a ‘single’ maybe a ‘couple’.

    We have to spend more today than back then because we won’t choose to live that old-fashioned lifestyle. What grandma & grandpa had, grand-daughter turns her little nose up at.

  29. 29
    TJ_98370 says:

    Great post Tim and worthy comments also. I’ve long suspected that purchasing a home was easier for the “GI generation” than what it is today and your Affordablity Index graph supports that conclusion. Mikemcc’s comments are valid also.

    -Average house size (1999): 2,250 sq. ft., up from 1,100 sq. ft. in the 1940s and 1950s
    Increase in average house size, 1950 to 1999: 105%
    Square area of living space per occupant (1997): 800 sq. ft., up from 290 sq. 1950
    Source: U.S. Bureau of the Census

  30. 30
    economist says:

    However, I think you will note that he does not explain why 1 implies 2. I’m interested in hearing that explanation.

    Because the top x% of income earners only live in the top x% of dwellings. Who cares how much Bill Gates makes? He only lives in one house.

    The bottom y% of dwellings have to sell to someone, and their price has to be affordable to the bottom y% of earners either as owners or renters. And for anyone who says that rich people are going to buy the low end and rent it out, no they’re not going to do that unless and until it’s cash flow positive.

  31. 31
    mikemcc says:

    Yikes! TJ, this is great data: Average house size (1999): 2,250 sq. ft., up from 1,100 sq. ft. in the 1940s and 1950s
    Increase in average house size, 1950 to 1999: 105%
    Square area of living space per occupant (1997): 800 sq. ft., up from 290 sq. 1950
    Source: U.S. Bureau of the Census

    Obviously, as a society we are living LARGE. Can we go back to yesterday? Probably not too likely.

    So, basically, if a family of 3 bought that ‘cutest home in Ballard’ at $315,000 they would likely match the affordability index. Food for thought, but of course you can’t get people to consider that. Plus, the pictures make that house look cuter than it was in 1950 or in 1960, much cuter, therefore more expensive.

  32. 32
    Check Your Facts says:

    Software Engineer:

    Since when is wikipedia an appropriate source? I could login right now and change the figures. I’d fail out of school if I used wiki for stuff. You’ve got other sources and that’s great. Just don’t throw wiki out there as a primary source… or any type of source for that matter. It simply isn’t reliable.

  33. 33
    cosmos says:

    Below is a link where you can view the WA State Office of Financial Management’s household income data. Notice, they are estimates relying on the census data.

    Also notice the caveat: “The estimates shown may differ from other median household income data developed from the Office of Financial Management’s State Population Survey, Bureau of the Census surveys, or other sources. Survey data, which are subject to sampling variability and bias, are not necessarily more correct than the estimate data.”

    All stats should be viewed with a critical eye. For special attention to U.S. federal stats, see

  34. 34
    zinck74 says:

    It’d be interesting to somehow factor in price per sq ft into these calcs. Not sure how possible that would be however. It’s sort of the same phenomenon as seeing that Kirkland has the highest median home prices in the region. The problem is, you get more McMansions there than you do in Seattle. Price per sq ft in Seattle is much higher than Kirkland.

    Another factor is net migration into the region. The desirability of Seattle has most likely gone up since the dotcom boom thus increasing the amount of outside money coming into the region. This reduces the influence of income. Seattle does not exist within a bubble (pun intended). It’d be interesting to see some migration stats for Seattle and King County plotted against this as well. Those selling houses in more expensive areas can easily afford homes here.. Many years ago it seemed as if California bashing was this region’s number one sport. I’ve seen and heard less of it the last few years. Probably because half the residents now here are from California. :)

  35. 35

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.