Financial Architecture of Affordable Median New Home Prices

Over the past few years we have heard a lot about home values. We have heard that millions of Americans are underwater - they owe more than their home is worth - and there are thousands of sound bites from politicians, promoting policies that they feel will best address the housing crisis. It seems that almost everybody wants home values to go back up - or at least stop falling. It would definitely lift a burden from the shoulders of many struggling families. But, almost simultaneously, we were hearing another oft-repeated phrase, and this phrase raised a lot of questions in our minds about the home value problem. The phrase, and you will most likely recognize it, is this: real value wages have remained mostly static over the last 30 years. That is to say, if you take inflation into account, people are not making more money than they were 30 years ago. So, obviously, the question is this: if people are not making any more money, how can they afford to buy homes that are increasing in value? So, we took to the census, looked at some income numbers and some housing numbers, put them into a spreadsheet and came up with the following:



The point is this: if wages remain stagnant, how can we expect our home values to do anything but remain stagnant? If we want to treat our home as a growth investment, how can we expect our children to be able to purchase homes for their families? Certainly there will be real estate "hot spots" where supply cannot meet demand, and therefore values increase proportionately. But if you take a look at the entire housing picture, these "hot spots" are a separate and almost unrelated circumstance when the primary concern is the median income homeowner. When the median home value to median household income ratio becomes too large (we guess somewhere between 4.5 and 5), people simply cannot afford homes. (If you couple this with other family budget items that have grown faster than inflation, i.e. health insurance, the picture gets worse.) During the housing bubble mortgage lenders made credit too easy in order to maintain the illusion of affordability. The collapse of inflated housing prices is likely the most frustrating burden that the economic downturn has placed on the middle class.

So, what does this have to do with architecture? The most significant and interesting residential architecture is a home that is personalized to the home owner(s). As architects, we want people to recognize the impact their space has on them. We want people to realize the value quality architectural design can bring into their lives. Even when purchasing an existing home, we encourage people to take charge of their space, remodel it, make it fit them. In the face of stagnant wages and increasing home values, it is difficult not to become cynical about architecture for the middle class - the mediocrity we strive to elevate. Under increasing financial pressure, we realize that people will have less and less means and appetite for architecture. In the face of this, we must concede that in most circumstances, quality architectural design is a luxury, not a necessity. And when you consider your profession to be so important in so many ways, that's a tough realization.