Continuing the theme that things aren’t as bad as everyone thinks…
Let’s look at the total cost of purchasing a home, which I’m defining as the cumulative mortgage payout over 30 years. Note the below chart.
In 1984, the median sales price of a house was about $78k, and the interest rate for a 30 year mortgage was almost 14%…total cost of about $330k. That same year, the median household income was about $22k, which means the average family was paying almost 15 years of wages to purchase a home.
Fast forward about 40 years…because interest rates have been in a long term decline, the average family in 2022 can purchase a house (if they can find one…that’s a subject for another day) for about 9 years of wages.
Yes there’s inflation, but a number of factors, primarily TECHNOLOGY has made our standard of living much better. Things cost more in nominal terms but as a percent of hours worked (and specifically physical labor exerted) the true cost has actually declined.
Another lifestyle factor to consider is the bells and whistles that are available in today’s houses. I don’t know about the house you lived in 1984, but mine didn’t have air conditioning, granite countertops, nor a theater room (it didn’t even have cable TV or a VCR). Nothing like internet existed at any price. The major convenience and technology that it did have was a telephone, affixed to the wall, with a coiled cord that stretched about 25 feet.
Things have gotten better over the past 40 years and I’m expecting that trend to continue.
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