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In response to some comments on a prior thread (square footage is cheating, need to use median wage, we care about impact on household budget), I created a new graph to show housing costs over time. While 1973 is the best year on here, 2009-2018 compares favorably with mid-1970spic.twitter.com/aKpjXOg7FA
![dat bluegrass boi [blue checkmark]](https://pbs.twimg.com/profile_images/1026450781644316674/hEEagvV7_normal.jpg)
And remember, this is for one wage earner. Many more families have two today! I know that's supposedly the "two income trap," but when it comes to housing, it is no trap! With two median earners, you would be spending LESS on housing today than in 1973 (20% of budget vs 30%)
What really looks bad is the early 1980s! 70% of your budget would have to go to housing! Wow! What was the "avocado toast and lattes" crack that people would have made about Boomers at the time?
In the end you could say: "OK! But we're still no better off than the 1970s! It's flat!" 1. But since land is highly inelastic, flat prices are really surprising over a long time period! 2. The houses are better. Not only bigger, but more amenities (half with A/C vs >90% today)
Oh yes, and this is just for principal and interest. I didn't have any good way to account for property taxes and insurance (though on property taxes, given the caps most states put in place in the 1970s and 1980s, I suspect these have gone up slower than other costs)
And all of my calculations assume 20% down on the mortgage. Saving for that does take quite a bit longer (though less than 20% down with PMI is an option today, and anecdotally parents helping with DP is more common)pic.twitter.com/TpCGbroJiX
One more note that others asked about: why use NEW home prices? Why not all homes sold? As the graph here shows, it doesn't really matter. I used New homes because you can get better data on amenitiespic.twitter.com/9dFIoOibCn
Where are you buying a 2500 SQF house for $333k? Certainly not in any desirable area or economically successful urban center
My 2600 square foot, 5 bedroom, 3 bathroom house was $244,000. But I guess where I live is not "desirable" (despite population being 4x what it was in 1970)
As an economist, I hope I don’t need to tell you about the shortage of homes/apartments in highly productive urban centers
Tell me
seriously?
How about you go on Redfin and just search for homes in Bay Area and/or NYC area. Or LA.
Less than 1/3 of the US population lives in those areas. And you are right housing prices are crazy there! But for the other 2/3 of the country, the story is different. Try Charlotte. Buffalo. Columbus. Fargo. Albuquerque. Fayetteville. Productive, cosmopolitan, affordable cities
Could you provide that same graph with a second axis showing nominal interest rates for the assumed mortgages? My sense is that's doing a lot of work here.
You might like this chart @xenocryptsite
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