What The Brady Bunch Can Tell Us About Housing Market Dynamics
So I have a new dream purchase, since I learned this week that the Brady Bunch house is up for sale. I’m still kinda pissed that I missed out on purchasing the Ferris Bueller house a while back, I figured this might be a good opportunity…*checks price* $1.8 million? Yeah no. But this got me thinking about housing markets…
First off, optimistic me was all “ok maybe there’s a huge premium placed on the property because it’s the Brady Bunch house”…but according to Zillow, the median home price in Studio City (Los Angeles, where the house is located) is about $1.3 million, so the price doesn’t seem that out of line with others in the area. Maybe it’s bigger than the others then? The thing is, I remember my classic TV pretty well, and part of the show’s schtick was that all of the kids lived in two bedrooms connected by a bathroom. So if the house is an accurate representation, it has…four bedrooms? (one for Mike and Carol and one for Alice in addition to two for the kids) *checks real-estate listing* The real house has three bedrooms and two bathrooms, so not far off…from either the Brady Bunch storyline or the average house size I guess.
It’s pretty likely that Mike Brady gets a discount on houses that he designs himself (he’s an architect, remember), but I still have a sneaking suspicion that today’s Mike Brady wouldn’t be able to afford the house, which is kind of a bummer. (To be fair, we could be looking at a Friends or Sex and the City situation where the characters couldn’t even afford where they were living at the time.) But it’s not immediately clear whether this is due to changes in housing prices or changes in architect salaries (or both). Maybe architects used to make more money relative to the population than they do today? I looked at some numbers- the median salary for an architect nowadays is about $77,000, which is about the 6oth percentile in terms of household income. (In other words, about 60 percent of households have income of less than $77,000 per year. Also, in case you’re wondering, Carol Brady didn’t have a job.) Mike seemed pretty senior though as far as architects go, so let’s say he’d be at the 80th percentile in terms of income today. If I fiddle with some numbers and project back in time, I get something that looks like this:
(Basically, I fixed both architect and 80th percentile income to an index of 100 in 2013- the latest year for which I had data- and scaled the historical values accordingly.) This suggests that architects like Mike were below the 80th percentile in terms of income at earlier points in time, which certainly doesn’t help solve the puzzle. (The related upside is that architect salaries have been increasing faster than average.) The good news is that the Brady Bunch house isn’t representative of all houses in the U.S.:
(This time, I fixed all of the values to an index of 100 in 1975- the year after the show ended- so that we could compare relative changes over time.) First, holy housing bubble Batman (see that green bump there?)…second, it’s not so much that the median home has gotten more expensive (relative to income) for people like Mike Brady, it’s that houses in places like Southern California have gotten way expensive. In fact, I’m amazed at how well house prices track income here and checked 12 times to make sure that I didn’t make a calculation error somewhere.
But here’s where it gets more interesting…what if we don’t look at the 80th income percentile? What if we look at a more average household versus housing prices? After all, not only the top 20 percent of households own houses.
This…well, is way more interesting than it probably looks on the surface. It suggests that, while housing price increases tracked income gains for this group for a while, we now seem to be in a new world where middle-income families are consistently spending a larger fraction of their incomes on housing than they used to (or buying less nice houses I suppose). Given how income inequality has been increasing over time, this effect is even stronger for the 40th and 20th income percentiles. But wait, there’s more…what if we just look at the prices of new houses rather than all houses?
So new houses are becoming increasingly expensive (again, relative to income) even for households that by any reasonable standards are doing quite well. Now, some of this maybe be unavoidable- if people just happen to like new houses better than…used houses? then new houses should sell at higher prices, but this preference would have to be getting stronger over time in order to give the pattern we’re seeing above. That’s possible, but it’s also possible that developers are targeting the upper end of the market and building new houses that are fancier than existing houses. Let’s do one more graph:
Looking at this, I’m pretty confident in saying that up until 2013 or so, developers were pricing in line with the income gains of the top 5 percent of earners…but what on earth is happening today? Are you all only making houses for the 1 percent nowadays? (Actually this feels kind of right based on my Boston-based anecdotal evidence.)
Before we get too upset at this observation, I should point out that building more fancy housing should still make houses more affordable for lots of people- some high earners will move into the new fancy houses, leaving fewer people to buy the less fancy houses and keeping prices of existing houses down as a result. But geez…I’m basically saying that building more fancy housing is better than building nothing, but making the housing stock fancier will obviously lead to higher prices than building new less fancy houses would. I guess Mike Brady was doing his part to keep housing prices down by cramming all of those kids into 2 bedrooms, but there’s also a “you get what you pay for” lesson here.