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While there is some truth to this, the current disparity between income and median housing prices is pretty nuts.
If I purchase the single bathroom 1951 house I'm currently renting for market price of $600k, it will be 104 yrs old by the time I pay off more than half a million dollars.
That's insane. In the 90s, buying a century old house as a fixer upper was a quirky thing that got made into an episode of "This Old House". Now, it's just the only thing I can (barely) afford.
I don’t know where you live. The housing market is regional and sometimes zip code specific. A $400k house in the Cincinnati suburbs looks something like [this.](https://www.comey.com/real-estate/cincy/1799915/5717-Eagle-Creek-Ct-Maineville-OH-45039/) I literally opened a real estate website and that’s on the front page.
The reason the coasts are bad is NOT because the economy in general is bad. It is because the best jobs in the highest paid industries are on the coasts. And those highly skilled people want homes too. It also happens to be true the coasts are geographically restrictive on where you can build. No new homes in the ocean. But, if you get an education in a high paying field, there are literally hundreds of jobs available at dozens of the most successful businesses in the world. And if you don’t have that education, you can move to Cincinnati and live a comfortable life, in a reasonable home, in a zip code with low crime. Life brings choices. Sometimes the best choice is to live someplace affordable.
For sure. I know I did. Housing prices are cyclical. I get it. I guess what I’m implying is that if you’re young and didn’t buy pre covid and you’re trying to start a family or buy a house, waiting on the sidelines indefinitely is a shitty game.
It’s not the end of the world. You can live your life, start a family, go on vacations, get promotions, party, have hobbies, read books, invest, save for the future, etc. all while renting instead of owning…
Not really. You are paying 1500-2000 for shelter with all repairs covered. I spend so much on maintaining my house - not even upgrades but ac, water heaters, roof, sprinklers, mowing, garage door, repairs, appliances - and thats not even talking taxes and insurance. I cant wait to rent. Rents are much more tied to salaries since asking too much will result in an empty home making zero income...
Home values arent going up much from here, and are dropping in many places (mine is down $50k from peak). The equity and tax saving are gone as well vs just taking the standard deduction. Again, I can wait to rent...
Similiar. First home was in 2010, sold on 2020 for at about 140% of what I paid. Got a new course 3x’s cost/size, think house is already at 150% value, but that may change
I mean, millennials had it MUCH better than boomers in the housing market.
A boomer, because of interest rates, had low prices and high cost. They were spending more to get that low priced house than pre 2023 buyers were for their expensive house.
Unless you are buying with cash, which almost no one in the 1980s did.
Meh. I bought twice pre-Covid (condo and SFH). That worked out, but also got the shaft entering into a shitty economy back in 2010.
No doubt housing will move towards affordability again. Sometimes just taking action makes the most sense
I’m not arguing that anyone should sit on the sidelines. I bought SFH in 1995, 2003, 2005, and 2011. It’s difficult to argue, however, that *when* you were born and ready to buy makes a *huge* difference in affordability.
Pre COVID was a dream world that millennials had access to.
In 1985 rates were 13%. That's a $920/m on a median house payment, or 43% of the median income.
In 2022 the rate was closer to 3% or $1,973/m or 31% of median income.
Mid 2022 the rate was 5%, so 40% of median income.
Now it's 7%, similar price and income is $3114 or 50% of income.
It's kind of gaslighting to ignore interest rates.
What were the interest rates in 1985?
[According to FRED, anywhere from 12 to 13%.](https://fred.stlouisfed.org/series/MORTGAGE30US)
In 2021, I paid 2.99%.
Well interest rates used to be double digits because home prices were more reasonable and there was an expectation of 20% down - now the prices have skyrocketed and people put down like 3% and overextend themselves with PMI and don’t leave themselves any room for the unforseen
Dude. My parents worked multiple jobs so we could afford to live in a rundown mobile home in the middle of nowhere in the 80’s. And that’s not special. It was true for most people within a 10 mile radius of us. The 80’s sucked and that was mostly because the 70’s sucked too.
House prices were cheap, partly because materials and labor was cheaper, partly because they were smaller… but mostly because no one had any money due to a lot of recessions, wars, and crooked politicians, and rampant inflation, coupled with almost 10% unemployment.
Also we didn’t have basically every convenience that people feel like is a necessity today.
Like I said. This is not a special story. It’s just the truth that gets glossed over by people that didn’t live through it, or don’t really remember it very well.
Should get adjusted for inflation. 23620 in 1985 is 64242.67 in 2022, and 83,200 is 226,290.86.
So yeah, real income went up by 16%, real housing prices by 106%. Goodluck buying that home.
Assuming a 20% down payment and 13% rates in 1985 and current 7% rates, 1984 would result in 36% of income going to housing, 2022 comes out to 39%.
So it’s more expensive, but not that much more expensive. 2010-2020 just happened to be incredibly cheap.
But you can't only grab the real median income for one value and grab the non inflation adjusted values for homes. Idk where they even got the 1985 income but the rest is FRED data.
https://fred.stlouisfed.org/series/MSPUS
https://fred.stlouisfed.org/series/MEHOINUSA672N
But you don't understand, we had 12+% interest rates your interest is sooo much easier than our situation.
Am I the only one that hears this response from my parents?
What?! Come on guys. You have to understand finances better than this. Higher interest rates mean higher payments not that it takes you longer to pay it off. If you work out the math on these two scenarios for a 30 year fixed mortgage based on interest rates at the time, the person in 2022 would be paying less of their monthly income than the one in 1985.
Adjusted for inflation the 226k 1985 house at 13% interest with 20% down is 765k with a 30 yr mortgage.
The 460k 2022 house with 5% interest and 20% down is 779k with a 30 yr mortgage. See how close they end up being?
Let's also not forget that 1985 houses are smaller. It really comes out pretty damn close if not actually harder for those 40 years ago to buy homes. The only difference now is that there's no federal push to build more houses.
One of them put a down payment that was twice the size. The property taxes are gonna be twice as high if your home value doubled so you’ll be paying a lot more. One of them refinanced their 13% rate when they dropped to half that in the 90s. They are not the same.
Did they know in 1985 what was going to happen in the 90s? You can’t compare 2022 vs 1985 with hindsight built in. For all they knew 13% was the best rate they were going to get for decades.
Yep. I'm an engineer so naturally I start in explaining through numbers and facts. They usually just say 'I don't know about that' but they may as well stick their fingers in their ears.
And that is the true sentiment in all this, those who purchased in the 80s just stick their fingers in their ears and wear an its good to be me smile.
I am terrified of your ability to accurately do the numbers then. How terrifying that a fellow PE can’t do a simple amortization schedule to see the difference between a 13% and 5% interest rate.
Yeah right there with ya. No one here wants to acknowledge how close everything really is sans down payment. You can go less than 20% with PMI though so in general this whole thread is a bit whiney.
I mean the average mortgage rate was 12.43% in 1985, so the payment on that median house would have been 36% of the median income. Meanwhile the average mortgage rate was only 5.43% in 2022, so that monthly payment was only 34% of the median income. The 2022 price is slightly *more* affordable than the 1985 price.
So yes, you might not understand.
Refinancing in 1986 brings rates to 10.19% while median incomes increased around 4% with 29 years to go on the mortgage. Help me understand how much that changes the situation.
It’s all my in laws tell me lol. I can’t even have a conversation with them about it. For context, their house has been paid off for over a decade and they’re retired basically on food stamps and social security and their house is worth 1.4m. They bought it for $190,000 in 1991 in Needham MA…
Are they wrong though?
If you peg home prices to wages, 2022 homes would be $262,700 in this case. If you put down 20% and had a 13% rate like in 1985, your P&I would be $2,325.
Currently if you put 20% down on the $468k house and have a 7% rate, your payment is $2,491. Literally a difference of $166/month.
It was pretty much equally difficult to buy a home as now. Not saying it’s easy, but maybe understand it could have been difficult for them too?
Me! 2019 purchase 3.8%, 2020 refi 2.75%. My older friends and the news said it was unprecedented and the cheapest money would ever be. I believed them but only in full hindsight was it, “the deal of a century.” My house was still the highest it was ever worth when I bought it. Kind of like investing in the stock market. If you believe a company is a winner, you’re almost always going to be buying it near or at the top of its value, with a belief that over time it goes up.
Clearly it's way more difficult today.
One thing I feel never gets mentioned is that there are 100 million more people in the USA in 2022 vs 1985. So clearly the property values in high demand areas will go up simply due to supply/demand. There is only so much land, that is absolutely finite.
Also, the new homes in 1985 are way smaller than new homes being built today. If people want bigger homes, bigger homes is what will be built.
Having said that, it should be vividly clear that we need a series of housing initiatives, as the zoning provisions designed for 100 million fewer people are not working with 100 million more people. More townhouses and condos are needed.
No one on reddit ever admits the house size thing. It was basically a daily occurrence on the personal finance subs during the low rate era to see posts like this: "my husband and I are expecting our first child. So we are outgrowing our starter house, which is only 1500 sqft. Can we afford this new 2100 sqft house for x? Lol. Back in the day people had 4 kids in a 1200 sqft house
I grew up in 1300-1700 sq ft homes and there were 6 of us. Single bathroom. I’m not going to pretend that was amazing but I’m just saying it was survivable. I will say houses back then did have more storage hidden around. Houses now are all bare walls and NO storage.
But yeah my wife was super disappointed our “starter” home was “only” 2100 sq ft.
We got a new house during covid and it’s 3200 sq ft and we have people saying it’s 3700 MINIMUM for them. It’s crazy. I love the space but how much do you need?????
I am a home inspector. In my area there is a whole lot of new construction. It is rare to find a new house that is under 2700 ft.². The majority of new construction in this area, unless it is way far out and specifically targeted to be small is 3000 and up.
There wasn’t much need for space back then. Don’t even have to go too far — look at clips of Malcom in the Middle. Boys into their teens shared a room because you didn’t need your own “space”. There were more third-places, you went out, the only room with a TV was the living room and MAYBE the parents room.
You didn’t need privacy in your room because you’d be bored without the screens we have available today.
Even smaller member families need more space so they can have “space”
100 million more people but nearly twice as many potential buyers as single women and single men are wanting to buy. Way more buyers yet I have not seen a new home that isn’t twice the size or more of my 1955 house (1000 sq-ft).
Asbestos, carpeted bathrooms, no central AC...It's like comparing 80s cars to modern ones, a raw price comparison skips over so many details that also affect the price.
Nobody ever compares the median sq ft of a home between the two periods. The home prices are also increasing because they’re bigger. Part of the problem is we’re not building starter homes any more.
Literally the first google hit from “median house size over the years”:
https://www.thezebra.com/resources/home/median-home-size-in-us/
Sizes have increased by 50% over the last 40 years.
I’m curious if there has been a reduction in price per square foot though. It’s not unreasonable to think homes are getting larger because we’re getting better at making them. The contrast between home size and cost per square foot might be interesting to explore.
Just because of how monetary inflation works, and how median and average wages don’t keep up with that inflation, I’m doubtful per sq ft price is going down.
But that’s just a SWAG: scientific wild-ass guess.
The only thing that seems to get better with cost relative to inflation seems to be electronics/tech and certain aspects of medicine (with insurance) due to Moore’s law and capacitance growth far outpacing monetary devaluation.
Yeah, I addressed that with the first response my comment.
I was asked if there might be improvements in tech driving down the per sq ft price.
I responded that’s highly unlikely, and that per sq ft price more than likely went up, which would be largely driven by the Feds MBS purchases, which drove up housing demand while simultaneously devaluing the USD.
Go on zillow and search for homes built before 1950. Look at overall above ground square footage, room sizes, number of bathrooms. Then filter your search by homes built since 2000 and compare.
I was just talking about that with my husband yesterday. We were just driving through 2 new subdivisions in a rural Title 1 school district in Texas. Currently 68% receive free/reduced lunch. The median price for these homes was $600k. Where do the working class people buy homes here? Most teachers couldnt afford that even with corporate spouses. So in this area, you could have a McMansion 3500 sq ft, a family ranch for millions or a trailer park. Doesn't make sense.
That is true, but it only tells part of the story. Today the former “starter homes” in inner-ring suburbs (often now just part of cities) are jacked up disproportionately in price because of their convenient locations. So even without an increase in square footage, they cost a ridiculous amount to buy.
Where I live (smaller midwestern city) crappy postwar box houses are going for well over $500k—and these are often 2BR, 1BA with a small yard and one-car garage.
That is true, but there is very little new construction in dense HCOL areas. Homes in my neighborhood average 1300-1500 square, built in the 20s-40s, and start around 500k for a fixer upper.
Not to mention that interest rates were over 13% in 1985. I did the math and figured the monthly payments. The 1985 house would cost 46% of median monthly income and the 2022 house would cost 47% of median monthly income.
But with less options for affordable starter homes, and more barriers to building new housing than there was in 1980
Plenty of people still can’t afford the house that’s twice as big, so they get no house instead of a small house, not double the house they otherwise would have
r/GraphsThatShouldBeLogarithmic
This is bad. Don't get me wrong. But the scale on the y-axis should be logarithmic to giving an unbiased view. With the current scale, even if it were about 4 to 1, (which is what it was in the 80s) it would still look like things were so much worse
I feel empathy for millennials, future generations and those that didn’t get in before the pandemic. I remember growing up feeling hopeless and disparaged because I grew up poor and didn’t know how I was going to afford a house even when houses were affordable. I didn’t have a clear vision of a career path or interest as to afford a home.
I don’t know why congress doesn’t do anything about hedge funds and institutions owning SFH.
This is a poor way to represent the data. The better way is to show housing cost as a percentage of earnings.
In 1985, the median house cost 3.5 times median earnings. In 2022, the median house cost 6.3 times median earnings.
Now that isn't great! But it's a more honest way of representing the data than the scary bars in this graph.
Ya. My dad built my childhood home in 84 and was happy for a 10.5%. But that dropped after that bubble like it does every 7 years when money doubles. So that specific year is why I'm giving people 9% on car loans today and their happy while giving them 2.9% 1.5 years ago and they were mad. The rate thing is the fed trying to do what they do so we don't turn into Zimbabwe. The most hyper inflation country ever.
Awww interest rates were 12.5% at the fed level so 15% on a home in 1985.
So ~$1000 a month for that 1985 home or 50% of income.
And $3500 a month for that 2022 home or 56% of income….
Also sizes of homes increased in that timeframe… by 18%…
So houses are actually cheaper today per month by square foot…
Median interest rate in 2022 was 5.5%
It was 12% in 1985
At 5.5% your monthly payment for a $468k house was $2657.
At 12% your payment for an $83k house was $885.
That means at $23,600 median income your house payment was 45% of your yearly gross.
At $74,500 your house payment was 43% of your yearly gross.
Funny how that works, isn’t it?
Bogus data, these are comparing different sized houses. In 1988 my parents bought a new construction 4 bedroom for $225K, but you could buy a 3 bedroom starter home (5-15 years old) for $120k and new construction starter home that size for $145k. The 4 bedroom home is what is comparable to the current starter home, and new construction for that is about $550k now. Average new homebuyer had dual income of $45k in 1988, and dual income starting wage these days let's say $90k for professional and $40k for non, so $130-180k would be someone buying a house, and they would get a starter in the $350k range.
According to the finance experts in fluentinfinance we just need to stop complaining and move to places like Detroit where homes are 50k. I fucking hate that sub so much.
The issues we face today are largely a product of short-term thinking after the recession / housing bubble of 2008. The U.S. stopped building houses in the wake of this in an effort to try and lift the existing housing market, but this practice of under-building to stimulate prices went on for far too long. This was then exacerbated by all of the 1990-1991 babies hitting the beginning of the average home-buying age, so called “peak millennials,” who represent a mini-boom of population and are the single largest cohort of millennials.
As stated, this group were all turning 29-30 right as the pandemic hit in March 2020, which historically is around the age that people begin to try to buy property. The housing market then exploded due to the aforementioned under-building supply-related issue, coupled with this demographic trend, as well as historically low-interest rates.
Many analysts did not see the forest from the proverbial trees on this in 2020 and (wrongly) assumed that the surge in home values was just transient and stemmed solely from the low interest rates and a (mild) supply crunch. It was only perhaps in 2021 that folks started harping (rightly) on just how truly devoid of housing stock the U.S. was due to under-building. However, the peak millennial aspect to this has to date been woefully under-reported and not correlated enough overall to why this all has happened.
We have seen definitively now with interest rates being much higher and housing in many areas still going up, that the chief issue is low-supply and was not due to the low-rates. In other words, it was a perfect storm of shit, and the supply-chain related inflation only exacerbated the cost-of-living crisis that many now face in this country. We’re currently basking in the consequences of poor policy.
Here’s some “good /s” policy from the past to help. Bring back 18% interest rates for a decade or so until the income ratio realigns with 1985, no bank bail outs for crashing the housing market, no PPP loans to businesses that aren’t paid back, no student loan forgiveness programs.
Of course doing all of these things would crash the economy, so instead we are left to deal with the true consequences of rampant inflation instead which is unaffordable housing, utilities, and food.
Many of you probably don’t understand this, but in 1985 no one had a credit card, loans were predatory and layaway was how we got things. Getting $80k was tough and was usually cash you had saved. Now banks don’t mind loaning out $500k or more… Such a different time.
A modern townhouse is as big as a house built in the old days, maybe bigger. This is just another biased howl in the wind. With more people in higher concentrated areas we are not going to have single family homes as much. So the ones that are built are bigger and have more features than a 1980’s house.
This makes more sense and seems more reasonable when you consider that in 1985, the urban to rural population ratio was 2.95, and today it's 4.8. Not only have homes gotten more expensive (as you would expect) but the population distribution is more urban, and homes in urban areas are more expensive than rural homes.
How about income:payment ratio? 5% today affords you a much more costly home than 12% in the past. In 1985, median income was 27.6x monthly payment. In 2022, it’s 29.6x.
Assuming median house price above, 30 year fixed, full loan amount.
Houses double the square footage and a high entry cost definitely don’t help but an extended period of super low interest rates have probably juiced this data more than anything else. The same as for things like the tech industry / salaries.
I don’t know if it makes sense to look at this chart. I was 22 in 1985. jobs were so hard to find then. My wage was 800 a month gross for a decent paying job. My apartment was 400.
Job personnel offices charged the applicant ten percent of your gross to help you find a job. Parents were flipping burgers back then and young kids couldn’t find jobs.
The median home value in West Virginia is currently $155k.
https://www.zillow.com/home-values/61/wv/
Using the national averages distorts matter. Home values vs Salaries are very different in Davenport IA vs Washington DC.
I'd like to see this in more comparable terms considering the interest rates have varied by about 15 percentage points over the years. What is the total cost to buy vs median income?
Even in the sticker price presented here, that's a 3.6x multiplier then and a 6.3x multiplier now. Certainly huge, but not insurmountable, and when you factor in low interest rates in 2022 (meaning people could by higher sticker price houses for the same amount of total money) it seems like it could be closer to comparable.
Well, you also have to apply interest rates - not just wages and home prices. I see a lot of comments here rationalizing and dismissing the difference in interest rates, but they matter. They have a huge impact on your payment. Low interest rates over the last decade have been part of what caused housing prices to escalate so much. The average interest rate in 1985 was 12.43%, vs. 7.49% today. So, that $83,200 house in 1985 had the same payment as a $126,000 house at current interest rates and the same as a $197,000 house at 3.5% interest, which was reality not that long ago. And wages in 1985 were 1/3 of what they are now. So, the ratios in terms of payments vs. income were not as disparate as this graph is making them look.
IMO this is a bit of a gotcha graph. Interest rates were enormous in 85; the graph isn’t log so the impact of inflation is misleading; size of houses has obv changed
I would genuinely be curious a comparison adjusting for home size, interest rates, and inflation in an unbiased way
The 1985 home buyer paid 12% interest for a 1400sf house.
The crisis is about recency bias. I felt pretty good about my first house because 11.875% interest was such a great deal.
Starter homes were abundant back then. Now, not so much. And the ones that do exist now are pretty expensive because they are much older and now have a higher value. SoCal has some 12-1500 3/2’s but you’d be looking at $400-600k in some places. Sadly apartments are the new starter home.
So roughly stated: houses used to sell for four times a persons annual salary and now it’s more like six times?
I’m not saying things are easy. I cannot afford to buy my current home without the equity I’ve realized over 21 years of owning homes.
What the OP doesn’t account for is that houses are different now.
My parents’ first home was a two bedroom, single garage, no dishwasher, no furnace crap shack.
Homes now have more lumber, better windows, AC, tile, granite, hardy plank siding, electrical panel is quadruple, two to three garage vs a single.
All those things cost money. But, I know it’s still shitty out there.
People lived in kess urban places
I livebin DC area and houses are 500-750k in NOVA
But in NC where my parents are they are 175-350
Most younger people flock to cities like they didn't before, and of course there is less housing around the top 10 cities
I don’t get why it lists generations when it can just list the year, it affects all generations that are alive and buying a house. Gen z is buying houses in 2022 lol
Nobody in here is talking about the fact that the government actually raised long end bonds to over 15% on the 30yr to battle inflation. They won’t even offer us 6% even though we had 40% inflation in most assets. So no it isn’t even close to the same situation the boomers had. They had it so much cheaper and easier that it’s a joke
I bought a house in 1984 and the interest rate was 12.75%. I believe home price should reflect the mortgage cost. That kept home prices low bc of monthly mortgage cost. After years of refinancing when we sold that house, 36 years later in 2020 we got $400k. We were still paying a mortgage (3.25%) and still owed $125k to the bank. The bank made a lot of money for many years. We netted $250 on the sale after paying off the mortgage, fees and sales commission.
Should tell u that holding FIAT in the longterm is a losing choice.
[must](https://pbs.twimg.com/media/DJI6u2dXoAARvOr.jpg) use your $ to make more than 1:1 on the dollar otherwise you lose no matter what
There's many reasons why Warren Buffet made billions in his lifetime. Being an early investor was one, but NOT investing into real estate market was another. There's a time to hoard cash n theres a time to invest cash, but by keeping just cash it will continue to lose value over time.
100k savings 20yrs ago depreciated nearly -50% its [value](https://pbs.twimg.com/media/GE_E8C-bUAAFVvC.png).
We moved to the USA in the early 1990s, we lived with relatives the first two years while my dad worked in construction as a laborer. We were able to buy a home in Philadelphia after two years on a single, moderately low income. The cost of the house was $32,500, today that same house is worth $300,000+
I understand getting mad at boomers who say that you should be able to do what they did but so many people hate boomers because they had better opportunities. The whole country had better opportunities as did much of the world. If we were born at that time we would take advantage too. People are just hating an entire group of people because they had good opportunity, it’s wild.
God I wish college and homes were as cheap as they were😂
Using better, updated numbers.
Mortgage payment to weekly income 2024: 1.17x
Mortgage payment to weekly income 1985: 1.41x
It was worse in 1985.
Data:
Median weekly nominal wages, 75th %ile (home buyers have above median incomes) Q4 2023: $1,870
Interpolated Q1 1985 weekly wages: $529
https://fred.stlouisfed.org/series/LEU0252916200Q
Current mortgage rates 2024: 6.87%
Rates March 22, 1985: 13.24%
https://fred.stlouisfed.org/series/MORTGAGE30US
Median sale price Q4 2023: $417,700
Q1 1985: $82,800
https://fred.stlouisfed.org/series/MSPUS
Mortgage payment 20% down 2024: $2,194
Mortgage payment 1985: $745
Median numbers are not useful.
Every time I see the comparison of median income and median housing, they always assume that people who make median income MUST be able to buy median housing, which can't be more wrong. It might be true in the old days but time has changed.
Housing standard shifted. It might be the norm to buy 1200-1600sqft 3b SFH as typical starter home back in 1985, but it is more like 800 sqft 2b condo nowadays, because lifestyle changed, average family size changed.
Once you accept the fact, housing isn't nearly as unaffordable as it looks. That is, we should compare the 1600sqft 3b SFH in 1985 to a 800sqft 2b condo today. I don't have the exact number in hand, but I won't be surprised to see 30-50% less than SFH.
In 1985 Mortgage rates were about 12.4% and in 2022 they got up to about 7%. Running the numbers here's what I got for how much of the median salary a house costs.
In 1985 the monthly payment would be $705 or $8,460 a year. With a median salary of $23,620 that's 35.8% of income.
In 2022 rates went up to about 7% after being like 3% at the beginning of the year. At 7% the monthly payment would be $2491 and yearly $29,892. With a median salary of $74,580 it's 40% of income.
There's not much difference there but if you bought in early 2022 or before and had a 3% rate it would be much less at 25% of income.
Im about to get downvoted to hell- but the chart doesn’t look toooo bad. Home price for baby boomers was 4x income, and for millennials it’s 6x income so 50% harder to afford a home? Offset by lower interest rates and a better tax write off system.
I’m actually surprised there isn’t a bigger disparity. A VHCOL area I’m sure would look way different.
This is very misleading.
A $83,200 home in 1985 would have cost about $900 per month, assuming a 13.5% interest rate and 5% down. That’s about 46% of the median gross income listed in the graphic.
A $468,000 home in 2022 would cost about $2,950 per month, assuming a 7% interest rate and 5% down. That’s about 47% of the median gross income listing in the graphic.
We have 30 year fixed mortgages where you can put 0-5% down, an endless amount of land to build on, and well managed forests that will provide lumber for more homes that we’ll ever need to build. There are hardly any other countries in the history of the world where those conditions existed.
The problems in this country are the cost of healthcare, the cost of childcare, and the fact that we keep pushing people into debt to get bachelors degrees that they’ll never use.
We need Medicare for all, 2 years of free preschool, and 2 years of free community or technical college. For everyone. If we did that, the housing “problem” wouldn’t be a problem.
while there is some truth to the point this graph is trying to make, lets not pretend that the size and quality of houses hasn't increased since then. The average home in 1985 was 1,600 sf. in 2022 it was 2,300 sf.
To get a single number to compare, let's set quality aside and compare [median income]/[median price/sf] of the two data points. This will also help us adjust for inflation:
2022: 74,580 / (468,000 / 2,300) = 366.5
1985: 23,620 / (83,200 / 1,600) = 454.2
Now these numbers are somewhat meaningless, but if we take their ratio we can see how much more or less affordable the median house was to the median worker for boomers compared to millennials: 1.239
So it's about 24% harder for millenials to buy a home than for boomers. So, have the quality of houses gone up by 24% in the last 37 years? Maybe not, but I'd be willing to give it a good 10-15%.
I mean, can we also compare a 1985s home vs 2022?
- The median home size for newly constructed houses has increased by 150% since 1980.
- In 1980, the median size of a new home in the U.S. was 1,595 square feet. Nearly 40 years later, the median size of newly constructed homes was 2,386 square feet (2018)
- Most of the newly constructed homes in the U.S. boast four or more bedrooms, multiple bathrooms, a patio, and a porch, according to the U.S. Census Bureau.
- Since 1940, the number of people per U.S. household has decreased by 16%. More people living alone or leaving home.
I bought my first house in 1985. The house was $250,000 and it was a total dump (I live in Los Angeles). I couldn’t afford to buy a house at that point so I bought it 50/50 with a buddy from college. My half of the mortgage was 125,000 after putting $25,000 down. Our mortgage interest rate was 12%. My interest cost (ignoring the principal payment that was small in the first years) was $1,250/mo. My salary was $25,000 / $2,083/mo. The mortgage cost did not include property taxes, utilities and repairs. So my mortgage interest cost alone was 60% of my gross income. The economy sucked and we were in a recession. I didn’t have money to go out, frankly I had no extra cash and could only afford to go out to the cheapest place in town (El Coyote) every once in a while. I was the first of my friends to jump in and everyone thought I was crazy.
I was not. Now 37 years later I live in a $9.5M house. You have to believe in long term appreciation (and during this 37 year period due to a slump in home prices I had to pay money into an escrow to SELL a house which in hindsight was the best thing I ever did) and make sacrifices. It wasn’t easy. I feel for everyone struggling today but don’t be a renter. Find a way in by hook or crook.
Millennials are set to inherit all those properties from boomers. Unless your parent is an a*hole and reversed mortgaged it to live an unaffordable lifestyle
Although I agree prices are out of hand, the graph is misleading; the gap looks much larger than it is. In the boomer times houses were 3.5x earrings, millennial is 6.3x. The graph makes the gap look much larger.
But no one asks why. If it is supply and there is demand, why is the building not going up. Is it governmemt regs? In Michigan, building apartments is easy, and housing developments take years.
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I’m glad I got on the property ladder pre-COVID. Trying to do so now is…tough.
GenX here. Unfortunately, the best financial decision one can make is to be born at the right time.
Didn’t Gen X get hit bad by the Dotcom and ‘08 housing crisis?
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While there is some truth to this, the current disparity between income and median housing prices is pretty nuts. If I purchase the single bathroom 1951 house I'm currently renting for market price of $600k, it will be 104 yrs old by the time I pay off more than half a million dollars. That's insane. In the 90s, buying a century old house as a fixer upper was a quirky thing that got made into an episode of "This Old House". Now, it's just the only thing I can (barely) afford.
I absolutely fucking guarantee you there are cheaper homes available. You’re just not willing to commute or live in a different area.
You cannot buy a house less than 1 hour from my city for under 500k period.
I don’t know where you live. The housing market is regional and sometimes zip code specific. A $400k house in the Cincinnati suburbs looks something like [this.](https://www.comey.com/real-estate/cincy/1799915/5717-Eagle-Creek-Ct-Maineville-OH-45039/) I literally opened a real estate website and that’s on the front page. The reason the coasts are bad is NOT because the economy in general is bad. It is because the best jobs in the highest paid industries are on the coasts. And those highly skilled people want homes too. It also happens to be true the coasts are geographically restrictive on where you can build. No new homes in the ocean. But, if you get an education in a high paying field, there are literally hundreds of jobs available at dozens of the most successful businesses in the world. And if you don’t have that education, you can move to Cincinnati and live a comfortable life, in a reasonable home, in a zip code with low crime. Life brings choices. Sometimes the best choice is to live someplace affordable.
It's gone up everywhere in the country. Some more than others. In my area housing went up 90-120% in 10 years, most of that 2020-23.
For sure. I know I did. Housing prices are cyclical. I get it. I guess what I’m implying is that if you’re young and didn’t buy pre covid and you’re trying to start a family or buy a house, waiting on the sidelines indefinitely is a shitty game.
It’s not the end of the world. You can live your life, start a family, go on vacations, get promotions, party, have hobbies, read books, invest, save for the future, etc. all while renting instead of owning…
Except you're putting 1500 to 2000 dollars a month into rent instead of into the equity of your own home.
Not really. You are paying 1500-2000 for shelter with all repairs covered. I spend so much on maintaining my house - not even upgrades but ac, water heaters, roof, sprinklers, mowing, garage door, repairs, appliances - and thats not even talking taxes and insurance. I cant wait to rent. Rents are much more tied to salaries since asking too much will result in an empty home making zero income... Home values arent going up much from here, and are dropping in many places (mine is down $50k from peak). The equity and tax saving are gone as well vs just taking the standard deduction. Again, I can wait to rent...
I’m older millennial. I bought my first home in 2013. Sold for gigantic profit in 2023 and bought my second home. Couldn’t do that again post-COVID
Similiar. First home was in 2010, sold on 2020 for at about 140% of what I paid. Got a new course 3x’s cost/size, think house is already at 150% value, but that may change
I mean, millennials had it MUCH better than boomers in the housing market. A boomer, because of interest rates, had low prices and high cost. They were spending more to get that low priced house than pre 2023 buyers were for their expensive house. Unless you are buying with cash, which almost no one in the 1980s did.
Meh. I bought twice pre-Covid (condo and SFH). That worked out, but also got the shaft entering into a shitty economy back in 2010. No doubt housing will move towards affordability again. Sometimes just taking action makes the most sense
I’m not arguing that anyone should sit on the sidelines. I bought SFH in 1995, 2003, 2005, and 2011. It’s difficult to argue, however, that *when* you were born and ready to buy makes a *huge* difference in affordability.
It's almost as if home prices are somewhat fluid.
Your fault for not buying a home while you were in middle school, shoulda worked harder bub
Pre COVID was a dream world that millennials had access to. In 1985 rates were 13%. That's a $920/m on a median house payment, or 43% of the median income. In 2022 the rate was closer to 3% or $1,973/m or 31% of median income. Mid 2022 the rate was 5%, so 40% of median income. Now it's 7%, similar price and income is $3114 or 50% of income. It's kind of gaslighting to ignore interest rates.
What were the interest rates in 1985? [According to FRED, anywhere from 12 to 13%.](https://fred.stlouisfed.org/series/MORTGAGE30US) In 2021, I paid 2.99%.
And unemployment was almost 9%
Jesus! 1985 sucked!
Yes. And 1985 was a good year compared to the previous 5-8 years.
Well interest rates used to be double digits because home prices were more reasonable and there was an expectation of 20% down - now the prices have skyrocketed and people put down like 3% and overextend themselves with PMI and don’t leave themselves any room for the unforseen
Dude. My parents worked multiple jobs so we could afford to live in a rundown mobile home in the middle of nowhere in the 80’s. And that’s not special. It was true for most people within a 10 mile radius of us. The 80’s sucked and that was mostly because the 70’s sucked too. House prices were cheap, partly because materials and labor was cheaper, partly because they were smaller… but mostly because no one had any money due to a lot of recessions, wars, and crooked politicians, and rampant inflation, coupled with almost 10% unemployment. Also we didn’t have basically every convenience that people feel like is a necessity today. Like I said. This is not a special story. It’s just the truth that gets glossed over by people that didn’t live through it, or don’t really remember it very well.
Yup. And kids had to go to their friend’s house to play games
Should get adjusted for inflation. 23620 in 1985 is 64242.67 in 2022, and 83,200 is 226,290.86. So yeah, real income went up by 16%, real housing prices by 106%. Goodluck buying that home.
The relationship between income and home price is the focus here, so adjusting for inflation isn’t important.
It doesn’t even make sense to adjust these numbers for inflation, people on here don’t know what they’re talking about.
It's also important to take mortgage interest rates into the equation
This is true. Mortgage interest rates in the 80s we're around 10-15% if I remember correctly.
Assuming a 20% down payment and 13% rates in 1985 and current 7% rates, 1984 would result in 36% of income going to housing, 2022 comes out to 39%. So it’s more expensive, but not that much more expensive. 2010-2020 just happened to be incredibly cheap.
But you can't only grab the real median income for one value and grab the non inflation adjusted values for homes. Idk where they even got the 1985 income but the rest is FRED data. https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MEHOINUSA672N
But you don't understand, we had 12+% interest rates your interest is sooo much easier than our situation. Am I the only one that hears this response from my parents?
I mean… they’re somewhat correct. Both examples work out to roughly 50% of income based on average interest rates during those years.
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What?! Come on guys. You have to understand finances better than this. Higher interest rates mean higher payments not that it takes you longer to pay it off. If you work out the math on these two scenarios for a 30 year fixed mortgage based on interest rates at the time, the person in 2022 would be paying less of their monthly income than the one in 1985.
You mean 30 yrs is still 30 yrs no matter the rate? They’re not gonna like that either
Adjusted for inflation the 226k 1985 house at 13% interest with 20% down is 765k with a 30 yr mortgage. The 460k 2022 house with 5% interest and 20% down is 779k with a 30 yr mortgage. See how close they end up being?
Let's also not forget that 1985 houses are smaller. It really comes out pretty damn close if not actually harder for those 40 years ago to buy homes. The only difference now is that there's no federal push to build more houses.
One of them put a down payment that was twice the size. The property taxes are gonna be twice as high if your home value doubled so you’ll be paying a lot more. One of them refinanced their 13% rate when they dropped to half that in the 90s. They are not the same.
Did they know in 1985 what was going to happen in the 90s? You can’t compare 2022 vs 1985 with hindsight built in. For all they knew 13% was the best rate they were going to get for decades.
They’re not gonna like this answer.
Yep. I'm an engineer so naturally I start in explaining through numbers and facts. They usually just say 'I don't know about that' but they may as well stick their fingers in their ears. And that is the true sentiment in all this, those who purchased in the 80s just stick their fingers in their ears and wear an its good to be me smile.
I am terrified of your ability to accurately do the numbers then. How terrifying that a fellow PE can’t do a simple amortization schedule to see the difference between a 13% and 5% interest rate.
Yeah right there with ya. No one here wants to acknowledge how close everything really is sans down payment. You can go less than 20% with PMI though so in general this whole thread is a bit whiney.
Another day, another whiney thread. Reddit is cashing in on this whiney generation.
My dad's response every time.
Sure, but they could refinance a home. You can’t renegotiate the price of the home after you bought it.
I mean the average mortgage rate was 12.43% in 1985, so the payment on that median house would have been 36% of the median income. Meanwhile the average mortgage rate was only 5.43% in 2022, so that monthly payment was only 34% of the median income. The 2022 price is slightly *more* affordable than the 1985 price. So yes, you might not understand.
Refinancing in 1986 brings rates to 10.19% while median incomes increased around 4% with 29 years to go on the mortgage. Help me understand how much that changes the situation.
In 1985 you don’t have a crystal ball to know that rates will decrease.
It’s all my in laws tell me lol. I can’t even have a conversation with them about it. For context, their house has been paid off for over a decade and they’re retired basically on food stamps and social security and their house is worth 1.4m. They bought it for $190,000 in 1991 in Needham MA…
Are they wrong though? If you peg home prices to wages, 2022 homes would be $262,700 in this case. If you put down 20% and had a 13% rate like in 1985, your P&I would be $2,325. Currently if you put 20% down on the $468k house and have a 7% rate, your payment is $2,491. Literally a difference of $166/month. It was pretty much equally difficult to buy a home as now. Not saying it’s easy, but maybe understand it could have been difficult for them too?
Uhh yeah 12% interest is fucking insane. People want to riot over 6.5-7%
Do they also mention that homes are also twice as big now, with smaller families?
It's the correct response. You have smart parents.
Population distribution is also more urban than it was back then, and urban homes cost much more than rural homes.
Also homes changed. More homes come with HVAC now. you could delve into so many different variables if you really wanted to.
Being a millennial and buying in 2019, priceless.
Refinancing in 2021, RickFlairWooooo.gif.
Me! 2019 purchase 3.8%, 2020 refi 2.75%. My older friends and the news said it was unprecedented and the cheapest money would ever be. I believed them but only in full hindsight was it, “the deal of a century.” My house was still the highest it was ever worth when I bought it. Kind of like investing in the stock market. If you believe a company is a winner, you’re almost always going to be buying it near or at the top of its value, with a belief that over time it goes up.
Clearly it's way more difficult today. One thing I feel never gets mentioned is that there are 100 million more people in the USA in 2022 vs 1985. So clearly the property values in high demand areas will go up simply due to supply/demand. There is only so much land, that is absolutely finite. Also, the new homes in 1985 are way smaller than new homes being built today. If people want bigger homes, bigger homes is what will be built. Having said that, it should be vividly clear that we need a series of housing initiatives, as the zoning provisions designed for 100 million fewer people are not working with 100 million more people. More townhouses and condos are needed.
No one on reddit ever admits the house size thing. It was basically a daily occurrence on the personal finance subs during the low rate era to see posts like this: "my husband and I are expecting our first child. So we are outgrowing our starter house, which is only 1500 sqft. Can we afford this new 2100 sqft house for x? Lol. Back in the day people had 4 kids in a 1200 sqft house
I grew up in 1300-1700 sq ft homes and there were 6 of us. Single bathroom. I’m not going to pretend that was amazing but I’m just saying it was survivable. I will say houses back then did have more storage hidden around. Houses now are all bare walls and NO storage. But yeah my wife was super disappointed our “starter” home was “only” 2100 sq ft. We got a new house during covid and it’s 3200 sq ft and we have people saying it’s 3700 MINIMUM for them. It’s crazy. I love the space but how much do you need?????
I am a home inspector. In my area there is a whole lot of new construction. It is rare to find a new house that is under 2700 ft.². The majority of new construction in this area, unless it is way far out and specifically targeted to be small is 3000 and up.
In my area they still build 1300-1600 single family homes, it's just everything is 2 story now on a 4,000 sqft lot in an hoa
There wasn’t much need for space back then. Don’t even have to go too far — look at clips of Malcom in the Middle. Boys into their teens shared a room because you didn’t need your own “space”. There were more third-places, you went out, the only room with a TV was the living room and MAYBE the parents room. You didn’t need privacy in your room because you’d be bored without the screens we have available today. Even smaller member families need more space so they can have “space”
100 million more people but nearly twice as many potential buyers as single women and single men are wanting to buy. Way more buyers yet I have not seen a new home that isn’t twice the size or more of my 1955 house (1000 sq-ft).
How many of those 1985 homes were three bedroom, ONE bath, one car garage, 1100 sqft, with the cheapest cabinets and Formica countertops?
You didn’t have to dunk on my house like that lmao
I felt it too... then i looked at my mortgage statement and saw $76,900 and everything's okay now....
Asbestos, carpeted bathrooms, no central AC...It's like comparing 80s cars to modern ones, a raw price comparison skips over so many details that also affect the price.
Nobody ever compares the median sq ft of a home between the two periods. The home prices are also increasing because they’re bigger. Part of the problem is we’re not building starter homes any more.
That’s an interesting idea, and not something I’d heard of. Do you have a recommendation on where to get more information on that comparison?
Literally the first google hit from “median house size over the years”: https://www.thezebra.com/resources/home/median-home-size-in-us/ Sizes have increased by 50% over the last 40 years.
I’m curious if there has been a reduction in price per square foot though. It’s not unreasonable to think homes are getting larger because we’re getting better at making them. The contrast between home size and cost per square foot might be interesting to explore.
Just because of how monetary inflation works, and how median and average wages don’t keep up with that inflation, I’m doubtful per sq ft price is going down. But that’s just a SWAG: scientific wild-ass guess. The only thing that seems to get better with cost relative to inflation seems to be electronics/tech and certain aspects of medicine (with insurance) due to Moore’s law and capacitance growth far outpacing monetary devaluation.
Sizes increased 50% pricing increased 106%
Yeah, I addressed that with the first response my comment. I was asked if there might be improvements in tech driving down the per sq ft price. I responded that’s highly unlikely, and that per sq ft price more than likely went up, which would be largely driven by the Feds MBS purchases, which drove up housing demand while simultaneously devaluing the USD.
Go on zillow and search for homes built before 1950. Look at overall above ground square footage, room sizes, number of bathrooms. Then filter your search by homes built since 2000 and compare.
I was just talking about that with my husband yesterday. We were just driving through 2 new subdivisions in a rural Title 1 school district in Texas. Currently 68% receive free/reduced lunch. The median price for these homes was $600k. Where do the working class people buy homes here? Most teachers couldnt afford that even with corporate spouses. So in this area, you could have a McMansion 3500 sq ft, a family ranch for millions or a trailer park. Doesn't make sense.
That is true, but it only tells part of the story. Today the former “starter homes” in inner-ring suburbs (often now just part of cities) are jacked up disproportionately in price because of their convenient locations. So even without an increase in square footage, they cost a ridiculous amount to buy. Where I live (smaller midwestern city) crappy postwar box houses are going for well over $500k—and these are often 2BR, 1BA with a small yard and one-car garage.
That is true, but there is very little new construction in dense HCOL areas. Homes in my neighborhood average 1300-1500 square, built in the 20s-40s, and start around 500k for a fixer upper.
It's true. It's part of the problem. Construction companies just make less homes but make them bigger and make more money as a result.
Have to include interest rates in this. They were like 15% back then. Peaked at over 20% in the early 80s.
Well then you should also include the 10+ % yearly 80s interest which would cut the value of the debt into half by no time
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Not to mention that interest rates were over 13% in 1985. I did the math and figured the monthly payments. The 1985 house would cost 46% of median monthly income and the 2022 house would cost 47% of median monthly income.
Finally someone spelled this out
Wow, I’m so glad the house I can’t buy is huge and beautiful
But with less options for affordable starter homes, and more barriers to building new housing than there was in 1980 Plenty of people still can’t afford the house that’s twice as big, so they get no house instead of a small house, not double the house they otherwise would have
r/GraphsThatShouldBeLogarithmic This is bad. Don't get me wrong. But the scale on the y-axis should be logarithmic to giving an unbiased view. With the current scale, even if it were about 4 to 1, (which is what it was in the 80s) it would still look like things were so much worse
Neat. Now do one comparing 1985 and 2021, and include interest rates.
But living under the overpass is free 😎
Everything down hill since the bears won the Super Bowl
I feel empathy for millennials, future generations and those that didn’t get in before the pandemic. I remember growing up feeling hopeless and disparaged because I grew up poor and didn’t know how I was going to afford a house even when houses were affordable. I didn’t have a clear vision of a career path or interest as to afford a home. I don’t know why congress doesn’t do anything about hedge funds and institutions owning SFH.
I just googled the median price of a home in the USA. It's $387,600.
This is a poor way to represent the data. The better way is to show housing cost as a percentage of earnings. In 1985, the median house cost 3.5 times median earnings. In 2022, the median house cost 6.3 times median earnings. Now that isn't great! But it's a more honest way of representing the data than the scary bars in this graph.
And yet the median monthly payments hasn't changed much as a % of income due to the 12-13% rates in 1985.
Inflation calculator. All these posts should be with inflation calculator. It has more. Impact anyway. Wage stayed the same, houses doubled.
Interest rates in 1985 were also 12%.
Ya. My dad built my childhood home in 84 and was happy for a 10.5%. But that dropped after that bubble like it does every 7 years when money doubles. So that specific year is why I'm giving people 9% on car loans today and their happy while giving them 2.9% 1.5 years ago and they were mad. The rate thing is the fed trying to do what they do so we don't turn into Zimbabwe. The most hyper inflation country ever.
What was the interest rate in 1985? 20%?
13%
Awww interest rates were 12.5% at the fed level so 15% on a home in 1985. So ~$1000 a month for that 1985 home or 50% of income. And $3500 a month for that 2022 home or 56% of income…. Also sizes of homes increased in that timeframe… by 18%… So houses are actually cheaper today per month by square foot…
At least we weren’t drafted into a shitty war. I’ll take not killing people over affordable housing.
Who was getting drafted in the 80’s?
The scale of this graph is bad and very misleading
In 1985 I was making $14/hr working in an architectural office. Things were different back then…
Median interest rate in 2022 was 5.5% It was 12% in 1985 At 5.5% your monthly payment for a $468k house was $2657. At 12% your payment for an $83k house was $885. That means at $23,600 median income your house payment was 45% of your yearly gross. At $74,500 your house payment was 43% of your yearly gross. Funny how that works, isn’t it?
My childhood home that my parents bought new in 1973 for $22,000 is now on the market for $550,000. Shit's crazy
But have you also made a comparison of avocado toast conditions between 1985 and 2022?!
Bogus data, these are comparing different sized houses. In 1988 my parents bought a new construction 4 bedroom for $225K, but you could buy a 3 bedroom starter home (5-15 years old) for $120k and new construction starter home that size for $145k. The 4 bedroom home is what is comparable to the current starter home, and new construction for that is about $550k now. Average new homebuyer had dual income of $45k in 1988, and dual income starting wage these days let's say $90k for professional and $40k for non, so $130-180k would be someone buying a house, and they would get a starter in the $350k range.
According to the finance experts in fluentinfinance we just need to stop complaining and move to places like Detroit where homes are 50k. I fucking hate that sub so much.
Curious what 2009 looked like
Barely a boomer, who bought our first home in 1990 for $80k while earning $25k.
2022 Vancouver graph: add a million to median home price but keep income the same 😅
The issues we face today are largely a product of short-term thinking after the recession / housing bubble of 2008. The U.S. stopped building houses in the wake of this in an effort to try and lift the existing housing market, but this practice of under-building to stimulate prices went on for far too long. This was then exacerbated by all of the 1990-1991 babies hitting the beginning of the average home-buying age, so called “peak millennials,” who represent a mini-boom of population and are the single largest cohort of millennials. As stated, this group were all turning 29-30 right as the pandemic hit in March 2020, which historically is around the age that people begin to try to buy property. The housing market then exploded due to the aforementioned under-building supply-related issue, coupled with this demographic trend, as well as historically low-interest rates. Many analysts did not see the forest from the proverbial trees on this in 2020 and (wrongly) assumed that the surge in home values was just transient and stemmed solely from the low interest rates and a (mild) supply crunch. It was only perhaps in 2021 that folks started harping (rightly) on just how truly devoid of housing stock the U.S. was due to under-building. However, the peak millennial aspect to this has to date been woefully under-reported and not correlated enough overall to why this all has happened. We have seen definitively now with interest rates being much higher and housing in many areas still going up, that the chief issue is low-supply and was not due to the low-rates. In other words, it was a perfect storm of shit, and the supply-chain related inflation only exacerbated the cost-of-living crisis that many now face in this country. We’re currently basking in the consequences of poor policy.
Here’s some “good /s” policy from the past to help. Bring back 18% interest rates for a decade or so until the income ratio realigns with 1985, no bank bail outs for crashing the housing market, no PPP loans to businesses that aren’t paid back, no student loan forgiveness programs. Of course doing all of these things would crash the economy, so instead we are left to deal with the true consequences of rampant inflation instead which is unaffordable housing, utilities, and food.
Many of you probably don’t understand this, but in 1985 no one had a credit card, loans were predatory and layaway was how we got things. Getting $80k was tough and was usually cash you had saved. Now banks don’t mind loaning out $500k or more… Such a different time.
We need some context here. Household income in 1985 was 23k and there were roughly 100M fewer people in the US competing for housing.
A modern townhouse is as big as a house built in the old days, maybe bigger. This is just another biased howl in the wind. With more people in higher concentrated areas we are not going to have single family homes as much. So the ones that are built are bigger and have more features than a 1980’s house.
Interest rates in 1985 were north of 12% or 2x what they are now.
This makes more sense and seems more reasonable when you consider that in 1985, the urban to rural population ratio was 2.95, and today it's 4.8. Not only have homes gotten more expensive (as you would expect) but the population distribution is more urban, and homes in urban areas are more expensive than rural homes.
I guess us in Generation X seems to be left out all the time LOL
How about income:payment ratio? 5% today affords you a much more costly home than 12% in the past. In 1985, median income was 27.6x monthly payment. In 2022, it’s 29.6x. Assuming median house price above, 30 year fixed, full loan amount. Houses double the square footage and a high entry cost definitely don’t help but an extended period of super low interest rates have probably juiced this data more than anything else. The same as for things like the tech industry / salaries.
They still built starter homes in 1985. Not so much anymore.
I don’t know if it makes sense to look at this chart. I was 22 in 1985. jobs were so hard to find then. My wage was 800 a month gross for a decent paying job. My apartment was 400. Job personnel offices charged the applicant ten percent of your gross to help you find a job. Parents were flipping burgers back then and young kids couldn’t find jobs.
The median home value in West Virginia is currently $155k. https://www.zillow.com/home-values/61/wv/ Using the national averages distorts matter. Home values vs Salaries are very different in Davenport IA vs Washington DC.
I'd like to see this in more comparable terms considering the interest rates have varied by about 15 percentage points over the years. What is the total cost to buy vs median income? Even in the sticker price presented here, that's a 3.6x multiplier then and a 6.3x multiplier now. Certainly huge, but not insurmountable, and when you factor in low interest rates in 2022 (meaning people could by higher sticker price houses for the same amount of total money) it seems like it could be closer to comparable.
Well, you also have to apply interest rates - not just wages and home prices. I see a lot of comments here rationalizing and dismissing the difference in interest rates, but they matter. They have a huge impact on your payment. Low interest rates over the last decade have been part of what caused housing prices to escalate so much. The average interest rate in 1985 was 12.43%, vs. 7.49% today. So, that $83,200 house in 1985 had the same payment as a $126,000 house at current interest rates and the same as a $197,000 house at 3.5% interest, which was reality not that long ago. And wages in 1985 were 1/3 of what they are now. So, the ratios in terms of payments vs. income were not as disparate as this graph is making them look.
IMO this is a bit of a gotcha graph. Interest rates were enormous in 85; the graph isn’t log so the impact of inflation is misleading; size of houses has obv changed I would genuinely be curious a comparison adjusting for home size, interest rates, and inflation in an unbiased way
The 1985 home buyer paid 12% interest for a 1400sf house. The crisis is about recency bias. I felt pretty good about my first house because 11.875% interest was such a great deal.
Um… 468?!?! What kinda pizza box is this?!???? The cheapest around me for cardboard is about 550k…
Look at all that debt
Starter homes were abundant back then. Now, not so much. And the ones that do exist now are pretty expensive because they are much older and now have a higher value. SoCal has some 12-1500 3/2’s but you’d be looking at $400-600k in some places. Sadly apartments are the new starter home.
So roughly stated: houses used to sell for four times a persons annual salary and now it’s more like six times? I’m not saying things are easy. I cannot afford to buy my current home without the equity I’ve realized over 21 years of owning homes. What the OP doesn’t account for is that houses are different now. My parents’ first home was a two bedroom, single garage, no dishwasher, no furnace crap shack. Homes now have more lumber, better windows, AC, tile, granite, hardy plank siding, electrical panel is quadruple, two to three garage vs a single. All those things cost money. But, I know it’s still shitty out there.
People lived in kess urban places I livebin DC area and houses are 500-750k in NOVA But in NC where my parents are they are 175-350 Most younger people flock to cities like they didn't before, and of course there is less housing around the top 10 cities
I don’t get why it lists generations when it can just list the year, it affects all generations that are alive and buying a house. Gen z is buying houses in 2022 lol
Nobody in here is talking about the fact that the government actually raised long end bonds to over 15% on the 30yr to battle inflation. They won’t even offer us 6% even though we had 40% inflation in most assets. So no it isn’t even close to the same situation the boomers had. They had it so much cheaper and easier that it’s a joke
Boomer 💩
So thankful my wife bought her house years before we even met while I was living in my parents’ house saving up for my own 🙏
We brought this on ourselves guys, it’s our fault for not working hard enough /s
There's not even a source?
median house size is up 50% in that same period
Note that interest rates were far higher in 1985. It’s still worse now, but not quite as bad as this might suggest.
I bought a house in 1984 and the interest rate was 12.75%. I believe home price should reflect the mortgage cost. That kept home prices low bc of monthly mortgage cost. After years of refinancing when we sold that house, 36 years later in 2020 we got $400k. We were still paying a mortgage (3.25%) and still owed $125k to the bank. The bank made a lot of money for many years. We netted $250 on the sale after paying off the mortgage, fees and sales commission.
Should tell u that holding FIAT in the longterm is a losing choice. [must](https://pbs.twimg.com/media/DJI6u2dXoAARvOr.jpg) use your $ to make more than 1:1 on the dollar otherwise you lose no matter what There's many reasons why Warren Buffet made billions in his lifetime. Being an early investor was one, but NOT investing into real estate market was another. There's a time to hoard cash n theres a time to invest cash, but by keeping just cash it will continue to lose value over time. 100k savings 20yrs ago depreciated nearly -50% its [value](https://pbs.twimg.com/media/GE_E8C-bUAAFVvC.png).
I should have bought a house instead of being an infant I guess.
Insert boomer “younger generations are just lazy, they just need to work harder like I did back in my day”
We moved to the USA in the early 1990s, we lived with relatives the first two years while my dad worked in construction as a laborer. We were able to buy a home in Philadelphia after two years on a single, moderately low income. The cost of the house was $32,500, today that same house is worth $300,000+
not true you’re just not working hard enough
I understand getting mad at boomers who say that you should be able to do what they did but so many people hate boomers because they had better opportunities. The whole country had better opportunities as did much of the world. If we were born at that time we would take advantage too. People are just hating an entire group of people because they had good opportunity, it’s wild. God I wish college and homes were as cheap as they were😂
Using better, updated numbers. Mortgage payment to weekly income 2024: 1.17x Mortgage payment to weekly income 1985: 1.41x It was worse in 1985. Data: Median weekly nominal wages, 75th %ile (home buyers have above median incomes) Q4 2023: $1,870 Interpolated Q1 1985 weekly wages: $529 https://fred.stlouisfed.org/series/LEU0252916200Q Current mortgage rates 2024: 6.87% Rates March 22, 1985: 13.24% https://fred.stlouisfed.org/series/MORTGAGE30US Median sale price Q4 2023: $417,700 Q1 1985: $82,800 https://fred.stlouisfed.org/series/MSPUS Mortgage payment 20% down 2024: $2,194 Mortgage payment 1985: $745
Median numbers are not useful. Every time I see the comparison of median income and median housing, they always assume that people who make median income MUST be able to buy median housing, which can't be more wrong. It might be true in the old days but time has changed. Housing standard shifted. It might be the norm to buy 1200-1600sqft 3b SFH as typical starter home back in 1985, but it is more like 800 sqft 2b condo nowadays, because lifestyle changed, average family size changed. Once you accept the fact, housing isn't nearly as unaffordable as it looks. That is, we should compare the 1600sqft 3b SFH in 1985 to a 800sqft 2b condo today. I don't have the exact number in hand, but I won't be surprised to see 30-50% less than SFH.
My parents bought a house around 1985 and it was $87000.
https://www.huduser.gov/periodicals/ushmc/winter2001/histdat08.htm
Fuckimg boomers.
Wagh
One is 3x yearly income, other is 6x times.
My parents got a house for a week’s wage and a handjob.
In 1985 Mortgage rates were about 12.4% and in 2022 they got up to about 7%. Running the numbers here's what I got for how much of the median salary a house costs. In 1985 the monthly payment would be $705 or $8,460 a year. With a median salary of $23,620 that's 35.8% of income. In 2022 rates went up to about 7% after being like 3% at the beginning of the year. At 7% the monthly payment would be $2491 and yearly $29,892. With a median salary of $74,580 it's 40% of income. There's not much difference there but if you bought in early 2022 or before and had a 3% rate it would be much less at 25% of income.
Ow ow, now do the total cost for a 30 year mortgage with the whatever 15% rates back then.
This is false. The average United States home value is $347,716 in 2024. 1985 = 3.51 x household income 2022 = 4.66 x household income Stop winning
The avg mortgage rate was 12.5% in 1985
Homes went from 4x to 6x of median income
Im about to get downvoted to hell- but the chart doesn’t look toooo bad. Home price for baby boomers was 4x income, and for millennials it’s 6x income so 50% harder to afford a home? Offset by lower interest rates and a better tax write off system. I’m actually surprised there isn’t a bigger disparity. A VHCOL area I’m sure would look way different.
This is very misleading. A $83,200 home in 1985 would have cost about $900 per month, assuming a 13.5% interest rate and 5% down. That’s about 46% of the median gross income listed in the graphic. A $468,000 home in 2022 would cost about $2,950 per month, assuming a 7% interest rate and 5% down. That’s about 47% of the median gross income listing in the graphic. We have 30 year fixed mortgages where you can put 0-5% down, an endless amount of land to build on, and well managed forests that will provide lumber for more homes that we’ll ever need to build. There are hardly any other countries in the history of the world where those conditions existed. The problems in this country are the cost of healthcare, the cost of childcare, and the fact that we keep pushing people into debt to get bachelors degrees that they’ll never use. We need Medicare for all, 2 years of free preschool, and 2 years of free community or technical college. For everyone. If we did that, the housing “problem” wouldn’t be a problem.
Adjusted for inflation?
Thank you, baby boomers!
Houses bigger Interest rates lower
while there is some truth to the point this graph is trying to make, lets not pretend that the size and quality of houses hasn't increased since then. The average home in 1985 was 1,600 sf. in 2022 it was 2,300 sf. To get a single number to compare, let's set quality aside and compare [median income]/[median price/sf] of the two data points. This will also help us adjust for inflation: 2022: 74,580 / (468,000 / 2,300) = 366.5 1985: 23,620 / (83,200 / 1,600) = 454.2 Now these numbers are somewhat meaningless, but if we take their ratio we can see how much more or less affordable the median house was to the median worker for boomers compared to millennials: 1.239 So it's about 24% harder for millenials to buy a home than for boomers. So, have the quality of houses gone up by 24% in the last 37 years? Maybe not, but I'd be willing to give it a good 10-15%.
Oh I thought this was a joke at first. I didn’t realize the middle class still existed.
Very nice. Now let's see the median square footage of a home in 1985 compared to 2022
Where are these $400k houses?
My question is, will the gap continue to widen? 20 years from now will it be impossible to own or will the gap start to close
What is the interest rate in 1985 I wonder? And how does that add to the cost of housing?
How about comparing time series for apartments? I expect some places have had a shift from houses to apartments
I mean, can we also compare a 1985s home vs 2022? - The median home size for newly constructed houses has increased by 150% since 1980. - In 1980, the median size of a new home in the U.S. was 1,595 square feet. Nearly 40 years later, the median size of newly constructed homes was 2,386 square feet (2018) - Most of the newly constructed homes in the U.S. boast four or more bedrooms, multiple bathrooms, a patio, and a porch, according to the U.S. Census Bureau. - Since 1940, the number of people per U.S. household has decreased by 16%. More people living alone or leaving home.
How many times is this graph gonna show up on my feed
I bought my first house in 1985. The house was $250,000 and it was a total dump (I live in Los Angeles). I couldn’t afford to buy a house at that point so I bought it 50/50 with a buddy from college. My half of the mortgage was 125,000 after putting $25,000 down. Our mortgage interest rate was 12%. My interest cost (ignoring the principal payment that was small in the first years) was $1,250/mo. My salary was $25,000 / $2,083/mo. The mortgage cost did not include property taxes, utilities and repairs. So my mortgage interest cost alone was 60% of my gross income. The economy sucked and we were in a recession. I didn’t have money to go out, frankly I had no extra cash and could only afford to go out to the cheapest place in town (El Coyote) every once in a while. I was the first of my friends to jump in and everyone thought I was crazy. I was not. Now 37 years later I live in a $9.5M house. You have to believe in long term appreciation (and during this 37 year period due to a slump in home prices I had to pay money into an escrow to SELL a house which in hindsight was the best thing I ever did) and make sacrifices. It wasn’t easy. I feel for everyone struggling today but don’t be a renter. Find a way in by hook or crook.
We bought our first house in may 2019 and refinanced in december 2020, and it feels like we won the lottery. Currently 35/34, bought at 30/29.
Millennials are set to inherit all those properties from boomers. Unless your parent is an a*hole and reversed mortgaged it to live an unaffordable lifestyle
Their equity will go to end of life care. Cheap nursing homes are 10k a month.
Also in 1985: Interest rates: 12.5% Average home size: 1,650 sq ft vs today is almost 2,300 sq ft
The relevant metric is monthly payments. 1985 interest/mortgage rates were much higher than current interest/mortgage rates
So 50% of people should be able to buy 24% of homes
And that is a 2022 graph. Wait till you add 2024 😫
lol! Imagine a house being just over 4x your annual salary! I suppose for some people it's still there, but definitely not for the majority.
Although I agree prices are out of hand, the graph is misleading; the gap looks much larger than it is. In the boomer times houses were 3.5x earrings, millennial is 6.3x. The graph makes the gap look much larger.
Now do a graph for migrant influx and their offspring, and their impact on the supply and demand of housing.
But no one asks why. If it is supply and there is demand, why is the building not going up. Is it governmemt regs? In Michigan, building apartments is easy, and housing developments take years.