My elder cousin purchased a house in the city for $300,000 in 2001. No amount of stop-the-rat-race mentality gets me a house for $300,000.
Prices have gone up, way more than salaries.
> No amount of stop-the-rat-race mentality gets me a house for $300,000.
Note that the median price of a home in the US is somewhere in the $250k - $300k range.
Where is cool + cheap now?
New Orleans
Montreal
Kansas City
Pittsburgh
Are there enough creatives in meat-space to attain the critical mass necessary to generate those places like in the past? Or are many of them staring at their phones all day?
What was the median price of a home in the US in 1980 vs 2020. Then, what was the median salary in the US in 1980 vs 2020. Thats the real comparison.
No reason to note that houses are still cheap in some far off country, thats not really a convincing argument.
Per the St. Louis Fed [1], the median American home price in 1980 was ~65k. The median American home price in 2019 was ~320k. That's an approximately 4.9x increase. Also from the St. Louis Fed, the 1980 median American family income was ~21k, and the 2019 median American family income was ~86k. That's an approximately 4.1x increase. So it looks like median house price has increased about 20% more than median salary.
65K borrowed in 1980 cost $719/mo. 320K borrowed today costs $1349/mo (both are principal and interest only).
$719 in 1980 is $2258 in 2020.
[0] https://fred.stlouisfed.org/series/MORTGAGE30US - I picked 13% as an approximate (somewhat low even) average rate for 1980.
Compare what happens when you get a raise or a small windfall and try to pay your mortgage off early.
I'd pick "small amount, high interest" over "massive amount, low rates" if that were an option.
I am planning to refinance again (back to a 30-year mortgage) and won't be in any hurry whatsoever to pay it off early. Borrowing money at 3% nominal with the (hopeful) prospects of economic growth allowing inflation to return means that I expect/hope to be borrowing that money at negative real rates in the back half of that loan.
Thats what's happening the last five years.
I wish I could find the source, but I read a quote from someone that grew up back around the turn of the last century.
She said, "I never thought I'd be so wealthy as to have my own automobile. And I never thought I'd be so poor to not afford any servants"
Also, housing prices are highly regional. My brother bought his first house (4 bed, 2 bath) in our hometown for $58k about five years ago. Now he lives in a similarly sized house on 20 acres of land that he paid $200k for.
I live in a more populated area, but I also bought my house (3 bed, 2.5 bath) three years ago for $100k.
As to measuring inflation generally via the proxy of housing, the relationship is confounded by regulation that subsidizes demand and restricts supply, especially in cities like SF & NY, which is almost guaranteed to raise prices. In lots of other arenas, e.g. access to fresh food, real prices have gone down over time in America.
Now you’re increasingly < 10 miles from a Walmart and Amazon will deliver nearly everywhere.
15 years ago, a lot of this was still accessible, but you’d have to plan your Walmart trip or trudge through eBay or umpteen online retailers to cut out the b&m markups.
Cars can be built on assembly lines, mostly by machines, with very few humans doing the labor, and thanks to the speed of manufacturing, many millions can be built every year.
How do you "build" servants? Right now, a Mommy and a Daddy have to romp around until Mommy gets pregnant, then it takes 18 years and 9 months minimum to build that servant. But what about the systems in place to identify top talent and utilize that servant better? What happens if that servant is tested and has a 140 IQ. Well then we need her to be a nuclear physicist, or a cardiovascular surgeon, or an AI researcher. She's wasted as a servant, and we can't afford to waste our resources in the modern world.
The problem with Agatha Christie's quote is her outdated understanding of the world. In 1910, when Christie was 20 years old, the smartest person born to the lowest class of British society had precisely dick-all chance of rising to become a Fellow of the Royal College of Surgeons, even if it was clear to everyone he interacted with that he could easily do the requisite work.
I suppose one day someone will say, "I never imagined I would be rich enough to afford a robotic kitchen, but too poor to live on Mars..." or some such nonsense.
That 30k is around 85k today. Interest rates then vs today would make for the same monthly payment in actual dollars of around $500/month. $500/month in 1981 is like $1400 today. This would mean the house should be worth around $300k today at today’s interest rates.
Of course the location may be more or less in demand which greatly influences price.
Where I grew up the houses are more expensive than in the 80’s but the location isn’t in demand so the inflation and interest adjusted cost is well below the cost back then.
Those extra down payments are worthless now..
I do think the down payment is more difficult for many people today. The solution to this was to allow less than 20% down. But then the borrower has to pay PMI until they have 20% equity. There are tax rebates for first time buyers too.
People need more discipline in saving and investing and looking for smaller places in areas with less demand. Get into the market and build equity and scale up over time.
I think the main issue with housing prices is some people can’t afford to live where they want to live. And there’s some legitimacy there as people don’t want a long commute for various good reasons. But it boils down to people not being able to finance the lifestyle they want. Hence gentrification where those with limited means move into areas currently populated by people with even less means. And of course that has its own opponents who also generally oppose new development oddly enough.
Maybe remote work will loosen the demand to live in a handful of expensive cities?
When my parents got their first house in the 80s, I think the interest was just shy of 20%
If I buy a house today, I can literally get 0%* interest on the loan.
20% interest over 30 years means you have paid almost 6 times the value of the loan with your last payment.
So if they could afford the house at 20% interest, they can afford it at 5 times the price with near zero interest.
This has been one of the main factors for pushing house prices way faster than salary growth. The monthly payment can grow (somewhat) with salary while the sticker price on the house can grow much, much faster.
* Don't live in the US, but house prices in the EU are just as crazy as anywhere
Medical service doesn’t exist for the industry on top of it. Housing doesn’t exist for the industry built on top of it. I wish our government considered the well-being of the host nearly as much as the parasites rather than asking Mr. Mosquito what he thinks would be beneficial.
Now, you would save two months of payments..
I’d say the stop-the-rat race mentality is to move to a smaller city, unless you’re literally working on Broadway or some job that’s uniquely tied to a large city, there’s plenty of jobs and lots of space out in flyover country.
Many many houses, including mine, cost less than that. Some of them cost an order of magnitude less. If you're not considering moving out of a city with fancy tech career prospects a viable option, then you are possibly not understanding the concept of a rat-race.
Aside from a couple tech companies out there, good luck trying to relocated and wfh in the mid-west.
WFH might help break the cycle to some degree, but the majority people will still be in cities (by virtue of, well, being a city), which creates incentives for younger generations to go there (dating + outgoing life), even for those who would rather settle outside the city once they find a partner.
I agree though, that folks also live in cities by inertia. They've always lived there, and don't know any better. Even though they've got problems getting employment and housing, they can't see any solution. That's a demographic too.
Working from home seems to have a similar narrative on hacker news I’ve found, probably for similar reasons - either you work from home happily or you reluctantly go into the office.
30 year old 1 room apartments in small town Hokkaido. Just saying.
If a loaf of bread cost $0.10 in the US in 1950 and now you're like, well a slice of bread in Vietnam still costs $0.10, thats not really a good argument.
If a loaf of bread cost $0.10 in 1950 and now you're like, well a slice of bread in Vietnam still costs $0.10, thats not really a good argument.