Some of us have been around long enough to remember Paul Harvey’s radio program, “The Rest of the Story.” Harvey’s popular show covered variety of news subjects, with the host taking a journalistic approach to the details of a particular subject to bring out “the rest of the story.” My subject today, with what I hope is a Paul Harvey-style deeper dive, is the price of housing.

Forty years ago in 1985, the average sale price of a house was $82,800 and the average household income was $23,620. A house cost 3.5 times the average household income. Today, the average price of a house is $416,900 while the average household income is $83,150. Doing the same math, today’s house costs five times the average household income. Conclusion? Housing has become unaffordable.

Let’s dig in further, though. The average size of a house in 1985 was 1,785 square feet., while the average house size today is 2,400 square feet. To adjust for the difference, let’s change the numbers to reflect the cost per square foot. In 1985, the cost per square foot was $46.39. Today, the cost per square foot is $173.71.

Over the last 40 years, the annualized inflation rate was 2.79%. Using inflation only, the price per square foot should have increased to $139.46. That still leaves a $34.25 difference to explain.

For starters, I turned my attention to regulations, with the idea of trying to separate between energy and building codes. My search results told me most of those costs were identifiable only over the last 10 to 15 years. In fact, AI came back with some interesting data – for example, one source stated energy code updates alone in Washington State have added $39,876 to the price of a house since 2009. The AI search estimated that general code updates over the four decades ranged from $10,000 to $117,000 depending on region and scope. It estimated this amounted to an increase of $50,000 on the average house over the last 40 years. Breaking this into cost per square foot, that total is $20.83. Now we have $13.42 left to account for.

In 1985, new houses had linoleum flooring, laminate counter tops, melamine cabinets, eight-foot ceilings and two-car garages. Would home buyers accept this today? Probably not. They want tile or hardwood flooring, granite counter tops, solid maple cabinets, vaulted ceilings and three or more garage stalls. My AI search came back with a specific price range for each of the individual items mentioned, summarizing them to add between $30,000 to $80,000 to the price of a house depending on region. Using the low end of the range, the cost amounts to $12.50 per square foot. Using the middle of the range, it’s $22.92 per square foot.

I have a sense that regulations will not be lifted and revert to 1985. I also have a sense that homebuyers won’t look at base-level amenities as a way to return housing to more affordable prices. Mortgage interest rates present a challenge for many buyers in the form of monthly payments. While rates are consistent with long-term averages, they remain higher than the levels we’ve seen over most of the last decade. On top of this, there is a limited housing supply resulting in calls for regulatory action – that may have negligible effects on making housing more affordable.

And that’s the rest of the story!