How to Understand Rising U.S. Home Prices

In 1970 the average worker had to work 3.9 hours per square foot for the average home. By 2019 that had fallen to 2.75 hours

Letter to WSJ. 

"Ken Dvorak writes that our demonstration of strong upward mobility across American generations doesn’t consider “both sides of the equation,” claiming it looks only at income, not at prices (Letters, Jan. 12). He notes how the cost of housing has risen by reporting the relationships between the salaries and first-house prices paid by his father, himself and his son.

Careful reading of our article shows that the incomes we compare have been adjusted for price inflation, so the upward mobility we document is in terms of real purchasing power. But if you simply look at the number of hours you need to work to buy housing, in 1970 the average worker had to work 3.9 hours per square foot for the average home. By 2019 that had fallen to 2.75 hours, a 30% reduction. A home today has an additional bathroom, central air conditioning, modern wiring, internet cabling, weatherization and many other features that were uncommon or nonexistent 50 years ago.

We would bet money that Mr. Dvorak’s son bought a house that is significantly bigger and better than the house his father bought. The same is true in virtually every area of consumption, from medical care and food to clothing and transportation. We provide the full details of this progress in our new book “The Myth of American Inequality.”

Phil Gramm and John Early

Helotes, Texas, and Mount Pleasant, S.C."