In the early 1980s, the American Dream of homeownership felt tantalizingly close for many, even as double-digit interest rates loomed large. Fast-forward to 2025, and headlines scream about a housing crisis: sky-high prices, stagnant wages for young buyers, and millennials entering the market in their late 30s or older. But how do these snapshots stack up?
Drawing on historical data from home sizes, prices, incomes, mortgage rates, and down payments, dissecting affordability then and now is not as black-and-white as you might think. High rates crushed 1980s buyers, but today’s barriers are broader and more structural.
The Evolution of the American Home: Bigger, But at What Cost?
Homes have ballooned in size since 1980, reflecting a cultural shift toward “McMansions” and suburban sprawl. The median new single-family home in 1980 was around 1,595 square feet, a cozy footprint for the era’s families. By 2024, that figure had swelled to 2,210 square feet a 39% increase as buyers demanded open kitchens, home offices, and three-car garages.
Prices per square foot tell a starker story of escalation. In 1980, new homes averaged $42 per square foot; today, it’s $169, a nominal quadrupling, or about 3.21% annual growth compounded over 44 years. Adjusted for general inflation (3.09% via CPI), that’s a modest real gain of 0.12% annually above normal inflation, suggesting homes haven’t outpaced the cost of living per unit of space dramatically.
While there has been small increase in inflation adjusted prices, this growth isn’t just inflation. It’s fueled by land scarcity, zoning laws, and investor demand, making entry-level homes scarcer today, and “McMansions” more common.
Incomes: The Slow Crawl of the Middle Class
Wage growth has been the Achilles’ heel of affordability. Median household income in 1980 was $16,400 annually, equivalent to about $70,800 in today’s dollars after inflation. By 2024 median income reached $83,730, a nominal 411% rise, but only 18% in real terms over 44 years. Dual-income households are now the norm (up from 50% in 1980 to 60% today), masking stagnation for single earners or young families.
In the ’80s, a typical family could save for a home in under four years of full income; today, it takes five-plus, exacerbated by student debt.
Mortgages and Down Payments: The Financing Hurdle
Then there is the mortgage market, where the villain in the 1980’s was sky-high rates. The average 30-year fixed rate in 1980 hit 13.74%, due to Volcker’s war on inflation. Today’s 6.7% feels steep post-pandemic, but pales in comparison. This makes the cost of financing much more affordable by today’s standards.
Down payments tell a tale of caution then versus creativity now. In 1980, buyers averaged 28% down, a hefty $18,100 on a $64,600 home to offset rate risks. First-time buyers today have a median down payment of just 9% ($37,600 on $417,400), thanks to low-down-payment loans like FHA.
Looking at yields on monthly payments for a 30-year loan:
| Scenario | 1980 Principal | 1980 Monthly Pmt | 2024 Principal | 2024 Monthly Pmt |
| Era-Typical Down Payment | $46,512 (28%) | $542 | $379,834 (9%) | $2,451 |
At $542 monthly in 1980, that payment consumed 40% of a median household’s $1,367 monthly income, which was a heavy burden, often forcing skipped vacations or side jobs. Today’s $2,451 consumes 35% of $6,978 monthly income, which is actually more manageable.
What about property taxes
1980 Average Annual Bill: $946 per owner-occupied home
2024 Average Annual Bill: $5,372 per owner-occupied home
Inflation-Adjusted (Real) Increase: This is an inflation adjusted increase of 0.91%, well below CPI.
However, it’s important to keep in mind that this is a national average, and these numbers can vary widely from state to state. Families living in high tax states will commonly see property tax amounts well into the five figures. Nevertheless, on a national level, property taxes have grown much slower than inflation.
How about Homeowners Insurance
As per National Association of Insurance Commissioners (NAIC)
1980 Average Annual Premium: $330 based on the median home value.
2024 Average Annual Premium: $2,500 based on the median home value.
Here we see an average annual increase of about 4.5% annually, which is above the 3.09% rate of CPI over that same time period.
But keep in mind, as mentioned earlier, the median home has grown from 1,595 square feet to 2,210 square feet. That means the median home is about 39% bigger than in 1980. When you adjust for the size of the homes, the cost to insure per square foot has only grown by about 0.82% in real terms, which is well below the 3.09% annual inflation rate. This means that homeowner’s insurance is more affordable than it was in 1980.
Personal Pursuits Impact Outcomes
According to the US Census homeownership was 65% nationwide in 1980 and today hovers at 66%. But for under 35 years old, it’s fallen from 43% to 38%.
It’s also important to point out that a combination of more women in the workforce and two-family incomes, combined with longer academic careers have prolonged some of these factors.
As an example, the percentage of people over 25 pursing advanced degrees such as a master’s or PhD program has increased from 7% to 14% since 1980.
As a result, the median age to get married and start a family since 1980 has gone from age 22 to age 28 for women, and from age 24 to age 30 for men.
Additionally, the median age for a woman to have her first child has gone from age 22 to age 27.
This can explain some of why homeownership has fallen among younger people, as many younger people have delayed this stage of their life in pursuit of other priorities, and taken on substantial debt in order to pursue these alternative goals.
Affordability Verdict
By raw metrics, 2024 edges out 1980 in affordability as lower rates mean payments are a smaller slice of monthly income, and homes offer more space for the buck adjusted for inflation. Yet the crisis feels acute because of various factors:
- Entry Barriers: First-time buyers’ median age rose from 29 in 1980 to 40 today, delayed by the heavy student loan debt burden.
- Wealth Gaps: Investors and all-cash retirees make up 30% of the purchases in 2024, and crowd out newcomers, unlike the ’80s builder boom.
- Regional Divides: Homes are much more affordable in places like the mid-west, and extremely unaffordable for young people in places like New York and California.
Contrary to the common narrative, the data shows us that while the amount needed for a down payment is larger today on a relative basis, overall homes are still actually slightly more affordable nationally today compared to 1980.
Much of the recent narrative is a result of a recent spike in home prices. It’s also important to remember that asset classes are cyclical. The U.S. housing market peaked in mid-2006, with the national median home price reaching approximately $230,200 (per National Association of Realtors data). The 2008 financial crisis triggered a sharp decline, bottoming out in early 2012 at around $172,000, a drop of about 25% from the peak. Prices then began a steady recovery, driven by low interest rates, pent-up demand, and limited supply.
The median price fully recovered to the 2006 peak level in 2013 when the median price hit $231,000. This marked a recovery timeline of approximately 7 years from the 2006 peak.
While the data says that home affordability is not as bad as advertised, wage growth remains a problem. If real wages continue to stagnate, then the problem of affordable housing will become more problematic.
To make housing more affordable, we need more shovels in the ground building more units to adjust for population growth. This means regulatory reforms and other incentives for new construction.
About the Author
Joseph M. Favorito, CFP® is a Certified Financial Planner® as well as the founder and managing partner at Landmark Wealth Management, LLC, a fee-only SEC registered investment advisory firm. He specializes in helping individuals and families develop comprehensive financial strategies to achieve their long-term goals.