Sorting Through Noise to Identify Trend in Dual-Income Homes, Affordability Impact

Friday, April 6, 2018 by Zelman & Associates

Filed under: affordability demographics macro housing

From 2011-17, the median existing home price appreciated by 5.9% per year and the median multi-family rental rate climbed by 3.5% annually. Both figures outstripped our calculation of entry-level income growth at 2.2% per year. Naturally, the imbalance over this short period of time raises the question of affordability burdens on the entry-level consumer. We believe a longer-term view is appropriate to assess the situation.

Since this analysis holds constant an assumption of one-income households for direct comparability, we often get the question about the trend in dual-income households. To best answer the question, we isolate married couples with children living in single-family housing and married couples without children living in apartments, limited in both cases to 25-59 year olds. This filtering is meant to reduce mix impacts that can relate to the age, family circumstance or living situation of a household.

For example, in 2016, the most recent year of demographic data, there were approximately 22 million single-family households with a married couple aged between 25 and 59 with children also in the house. In 66% of these households, both spouses were employed in 2016, a figure that has risen consistently from a 62% recessionary low in 2010. Relative to our earliest data point in 2004, every five-year age cohort had a higher percentage of dual-income households, ranging from 310 basis points for 50-54 year olds to 700 basis points for 35-39 year olds. Similarly, looking at over two million married couples without children in apartments, 64% of households had dual incomes in 2016 versus 58% in 2010 and 54% in 2004.

In our opinion, this analysis highlights that assessing affordability pressures based on wage growth alone would likely understate household finances that are benefiting from a higher frequency of dual incomes. On the other hand, one could argue that housing affordability pressures, along with other areas of rising expenses, have more frequently necessitated a second spouse to join the workforce. Regardless of one’s view, we believe that most surface-level analyses and media headlines miss important demographic nuances such as this.

Sorting Through Noise to Identify Trend in Dual-Income Homes, Affordability Impact

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