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Working Papers

A Look at Real Housing Prices and Incomes: Some Implications for Housing Affordability and Quality

Working paper #324
Joseph Gyourko and Joseph Tracy

• Real incomes of low skilled workers still have not fully recovered to their levels from before the 1990-91 recession.
• Because the price of a constant-quality housing bundle continues to rise, the affordability problem for relatively low income occupants of lower quality houses has not abated, despite the prolonged economic expansion of the 1990s.
• Our findings suggest that the quality of low end homes continues to decline. Research is urgently needed to determine the cause. If it is due to an inability of low income households to adequately fund the maintenance of a very capital-intensive good such as housing, then encouraging lower income households to put what little wealth they do have into housing may be misguided. The net savings of these households may be negatively impacted.

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