Rising/Falling Cost of Real Estate, NYTimes Style

This front pager from the NY Times strikes me as an example of why people have become so skeptical of journalism as being more fluffy feeling-the-news infotainment than rigourous information and analysis. It appears to fashion a man-bites-dog story by deducing a reverse trend: that despite all the talk of a real estate bubble, the share of income that median families must devote to home ownership is actually lower than it was 20 years ago.

The problem is that you can only perceive this trend by ignoring the 25% of the country that lives in the northeast, south Florida, and California, and more importantly, by making sure that you are comparing what families are paying today to what they were paying in the early '80s, when interest rates were severely spiked upward and the housing market was in the midst of a previous boom. What's amazing is that even with interest rates through the roof in the early '80s and an ongoing boom, home buyers in NY, FL, CA, and DC were still paying a lower percentage of their incomes than they are now.

But more importantly, if the NY Times had bothered to compare what share of income median families paid for their homes in the 1970s, I suspect (without having done my own study) that they would have found that the parents of the current home buying generation paid less. But that's not a man-bites-dog story, so the NY Times didn't go back to the '70s. In addition, they buried another interesting lede in the article, which is that the share of income median families must devote to home ownership is the HIGHEST its been since 1989. Gee, I wonder what happened to the economy after 1989?

UPDATE: Elizabeth Warren over at TPMCafe picks up my point about the NY Times article using the early '80s as its point of comparison. But she makes a far more significant point: in the early '80s, people put 20% down payments on their homes, which is far less common now. Thus, the NY Times data comparison is deeply flawed: they are comparing the cost of median families paying for 80% of their homes in the early '80s with the cost of median families paying for closer to 100% of their homes today. Warren makes another significant point: for most families it now takes two incomes to achieve the median income status that was still more often achieved by one income in the early '80s. So your home may not take a greater share of your family income than it did in the early '80s, but it now takes twice as many people working to keep it that way.