> The real estate market in the US is one of the cheapest in the world relative to incomes.
But I'd still prefer it to be the way it was 20-30 years ago, than how it is now. So much more affordable in the past...
But I'd still prefer it to be the way it was 20-30 years ago, than how it is now. So much more affordable in the past...
In the 40's - 60's, the US was the manufacturing powerhouse while Europe and Asia were rebuilding. The US had the baby boom and the enormous natural resources to lean into that growth.
After some decades, we grew to a point that labor became increasingly expensive. Workers wanted more, consumers wanted more for less. So we outsourced the lower-end manufacturing jobs to lower cost of living areas, and ultimately shipped them overseas to developing economies.
The US now does mostly high-cost, value-add. We're sitting at the top of the production food chain and labor costs a tremendous amount. Fewer people, as a percentage of the population, are able to fill these jobs due to the high skill required.
20-30 years ago the end of the post-war tailwinds. We've been experiencing the US operate in a global economy where our lower class doesn't have access to what were once well-paying jobs. We moved those over to cheap overseas labor, and we benefitted greatly from the lower cost of goods.
Our highly compensated knowledge workers are pushing prices up at the high end, and there's less middle ground.
The middle and upper classes will be fine. It's those at the bottom that are suffering. Instead of providing means to lift our poor up and into the middle class, we're lifting laborers in India, Vietnam, and Mexico out of poverty and into their own growing middle classes. (Which I think is absolutely great for them. I just wish we could also help our own lower class.)
Interest rates were quite high (and surprisingly variable, as a modern observer) in the early 1980s, peaking at almost 20% and spending a lot of time in the teens [1]. However, the median house price [2] was still low relative to median household income -- at the interest rate peak of 18.9% at the end of 1980, the median house sale price was 66k, and the median household income was 21k [3], for a ratio of about 3.1. In 2022 the median house sale price was about 450k, and the median household income was $71k [4], for a ratio of about 6.3!
I think the mortgage rate difference does mean the 80s were still worse if you took out a long mortgage at the given rates. However, 1) you could also save for much less time and buy a house with a smaller mortgage, and 2) there seem to have been a lot of since-closed loopholes [5] like assumable mortgages (from my limited understanding: you essentially take over the current owner's mortgage, along with its lower rates from when they bought house) that meant a lot of people were technically buying houses with much lower effective rates.
So ... I question the claim that the early 80s were easily as unaffordable as now.
[1] https://fred.stlouisfed.org/series/FEDFUNDS
[2] https://fred.stlouisfed.org/series/MSPUS
[3] https://www.census.gov/library/publications/1982/demo/p60-13...
[4] https://www.census.gov/library/visualizations/2022/comm/medi...
[5] https://www.marketwatch.com/story/how-people-bought-homes-in...