Generation-Dividing Economic Doom-Porn v. Reality.
Posted by Ed Folsom, December 29, 2025.
I recently came across an article, “A Normal Salary Doesn’t Buy a Normal Life Anymore,” written by a guy named Grant Mercer. Mercer uses the example of a teacher who posted a video telling her audience that she bought a house in 2019 for $160,000 that is now worth $350,000 to $360,000. When she bought it, her salary was $40,000 a year. She currently makes $54,000 a year and couldn’t afford to buy her own house again. The teacher does not claim that a normal salary doesn’t buy a normal life anymore. That’s Grant Mercer’s claim. Instead, the teacher warns that going into teaching is no way to make money.
Mercer doesn’t just use the example of the teacher to argue that a normal salary doesn’t buy a normal life anymore. He also claims the teacher’s circumstances illustrate that America’s middle class is being erased.
Mercer tells us:
“There are a lot of people who try to say that the slow erasure of middle America is a conspiracy theory, but frankly, every day there are more and more stories from everyday Americans that show this isn’t something dreamt up by those with foil on their heads. It’s real, it’s happening.”
If America’s middle class is being erased, that’s kind of a big deal, so it might be worth diving into the numbers to examine whether we are really at that point of economic doom.
In the teacher’s particular case, her income increased from $40,000/yr. to $54,000/yr. between 2019 when she bought her house for $160,000 and 2025 when her house’s value reached $350,000 – $360,000. That’s a price rise of $190,000 – $200,000 against a mere $14,000 increase in her annual pay.
No doubt, home prices have shot up astronomically over the past several years, including in the Northeast U.S. and in Southern Maine where I live. But has housing unaffordability reached an unprecedented level that is erasing the middle class?
Remember the 1980’s?
Mercer’s piece calculates housing affordability by comparing the median sale price of U.S. homes to median U.S. household income. He points out that, in 1985, the median home price was $82,500 and the median household income was $23,620. In 2025, the median home price was $416,000 and median household income was $83,450.
Mercer tells us:
“Look, just to really put this in the plainest terms, back in 1985 America’s median home price-to-income ratio was 3.5. Now? It’s a staggering 5.0 in 2025.”
But why should we determine housing affordability by comparing the sale price of a median-priced house to median income, given that virtually no first-time, median-income buyer buys a house with cash. Nearly everyone takes out a mortgage. A household can afford a house when it has sufficient income for the monthly payments and enough left over for other necessary expenses. The amount that a household must pay to keep the house is determined by the amount borrowed, the loan term, and the interest rate (leaving aside escrowed taxes and PMI).
Because Mercer contrasts conditions in 1985 with conditions in 2025, I will use those same years to compare the monthly payment on a 30-year mortgage for the price of a median-priced house to the median monthly income during those same years.*
As Mercer’s article points out, in 1985 the median home price was $82,800 and the median household income was $23,620, for a price-to-income ratio of 3.5 to 1. What was the average monthly mortgage payment in 1985 on an $82,800 mortgage loan at the then-prevailing 30-year rate of 12.4%? The monthly loan payment would have been $877.27, from a median monthly household income of $1,968. In other words, in 1985, the monthly payment on a 30-year mortgage for the full price of a median-priced home amounted to 44.57% of median household income.
Let’s compare that to 2025, when the average 30-year rate was 6.8%, the median home price was $416,000, and median monthly household income was $6,929, or $83,450 a year. At that rate, the monthly payment on a $416,000 mortgage loan is $2,712.21, which is $39.14% of median monthly household income. The 1985 buyer was worse off, having to spend 5.4% more of monthly household income on the mortgage than a 2025 buyer.**
Things were even worse for the median-income home buyer in 1981. That year, the 30-year mortgage rate was 16.64%, the median home price was $60,967 and the median household income was $17,666. That yielded a monthly payment of $851.39 on a 30-year mortgage, which was 57.8% of the average household income of $1,472/month! That is clearly less affordable than the 39.14% of median household income represented by the monthly mortgage payment for a median-priced home in 2025.
I do not point this out to argue that home prices are affordable now. They are not. They are way out of reach for a lot of people. But I am pointing this out to say that things have been much worse, and that when things were much worse it did not result in the erasure of America’s middle class.
In fact, in very recent times people were much better off than anyone ever was in the 1980’s and ‘90’s. The teacher in Mercer’s article is an example. In 2019, she bought her house for $160,000. That year, the 30-year mortgage rate was 3.94%. The median household income was $63,030. The monthly payment on a 30-year mortgage for $160,000 at 3.94% is $758.34. That is only 14.4% of 2019 median monthly household income, and 22.7% of our teacher’s 2019 monthly income, way better than those Boomers had it back in the 80’s.
The payment on a 30-year loan for a median-priced house never dropped below 25% of median monthly income for the 27 years from 1981 through 2007. Then, in 2008 it fell to 24.17% of income and stayed below 25% through 2020 (except for 2017 when it rose to 25.17%). In fact, in 2011, the payment on a 30-year median-priced home loan dropped to only 19.5% of median monthly income.
But between 2020 and 2022, median U.S. home prices shot up more than 37% and mortgage interest rates began rising sharply from their historic lows. In fact, the 30-year rate of 3.11% in 2020 and 2.96% in 2021 helped to fuel the rapid jump in home prices during that time. Mortgage rates dropped, making it possible to pay higher prices in the form of monthly mortgage payments.
Now, something has to give, and something will. Will it be prices, interest rates, or both? The middle class definitely will not be erased.
Beware of generation-dividing economic doom-porn. It plays to baser instincts. Nobody is served by it other than those who collect a following by creating it, and above all else the political types who claim to know how to save you from the scary monsters.
Notes:
*I have used the information provided here for the median home price in June of each given year; the table here for the prevailing 30-year mortgage interest rate that same year, the table here for the median household income that year and the mortgage payment calculator here to determine monthly payments.
** In fairness to Mercer, his article does state, in what is essentially a footnote, that “mortgage payments as a percentage of income are actually a bit higher in 1985 than in 2025 because of the high interest rate 40 years ago.” But he chooses not compare mortgage-payment-to-income ratios, instead using median-sale-price versus income.
