Abstract

This project examined the average cost of mortgages for first-time home buyers in the United States over the past 25 years to observe any significant changes over that time. The underlying question asked in this analysis was, “What is the threshold that people are willing to pay for a house, and has that threshold changed over the last 3 decades?”

Null and alternative hypotheses were formed to examine the question. The null hypothesis was, “There is no difference in the affordability of houses based on metropolitan status and year between 1990 and 2015.” The alternative hypothesis was, “There is a difference in the affordability of houses based on metropolitan status and year between 1990 and 2015.”

A dataset was extracted from IPUMS to show information on housing, mortgage, and income levels since 1990, and the hypotheses were tested using a factorial ANOVA. Two new variables were created for this test:

·      “Total Mortgage Amount” added the values of all monthly mortgage amount variables and combined them into one.

·      This variable was then multiplied by 12, divided by total household income, and multiplied by 100 to obtain a percentage value for housing affordability.

These variables allowed comparisons of housing affordability to be made across the specified 25-year scope of the analysis.