Yep just a few years out of college. If I was graduating today there’s no way I could have afforded it.
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The concept of opposing pressures in economics along with the fact that the market, like the natural forces in physics, always seeks equilibrium, has always been fascinating to me. I visualize it as <> = >< occurring at the same time, with the forces always in flux. Any artificial (government) increase, or dampening, of these forces only temporarily delays the eventual movement towards equilibrium, while increasing the potential momentum that will accompany the eventual correction.
Government intervention often works that way.
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If government made refrigerators $1 for the rest of 2024 a lot of people would buy" them. (They’d also buy the biggest fanciest ones possible.) And when that program comes to an end, almost no one would seek to replace the refrigerator they have.
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If the government made cars $1 for the rest of 2024 a lot of people would buy them. (They’d also buy the biggest fanciest ones possible.) And when that program comes to an end, almost no one would seek to replace the car they have.
What’s happened in the housing market, both in the 40-year picture and the 5-year picture can be correctly understood in that light.
The chart is about “Disposable Personal Income”. Nonetheless, here’s what I found for 1980: $21,000, which would make the average home 3x greater than salary. The median income today from what I found is about $60,000 whereas the median price for a home today is about $400,000, which would be about 7x more than the salary. The house I grew up in (north NJ) was worth about $60,000 in 1980, today it would likely sell for over $600,000. That’s over a 10x increase. That would make the average salary in NJ over $200,000. Are there other things being factored in?
Yes.
the only information FRED has that goes back far enough t make a comparison is income vs home prices. "Income "includes income from Soc Sec. from small businesses etc…)
If I had limited the comparison to just salary/wages the comparison cold not go back that far.
- There is no doubt the current generation got the rug pulled out from under them.
(the rate of increase has never been this fast. It’s comparable to a dam breaking an down stream water levels returning to normal suddenly - It may very well be permanent or long term. We have spent 40 years passing restrictive zoning laws, letting the cheap neighborhoods go to hell (schools and crime) etc… (perhaps more on that later)
But if we compare just the two snapshots, the 1980’s to now, in the 1980s homes really were temporarily less-affordable.)
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Here’s something I found that I thought was applicable:
