Example of how housing prices have far outpaced inflation
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Anonymous
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https://www.redfin.com/VA/Arlington/1028-N-Frederick-St-22205/home/11237727
Sold for $52,500 in 1976. Its inflation adjusted price should be $297,309, but instead it’s on the market for almost three times that. Just posting this for the benefit of Boomers who contend that they paid 12% interest on their mortgages and don’t see what the issue is. |
Anonymous
The government cpi stats are low by half by design. Check the big Mac index. Real estate reflects the actual inflation rate |
Anonymous
Since 1976, the median household income in Arlington has increased by around 60% after adjusting for inflation. The average household size in Arlington has also declined from 2.7 to 2.1 Adjusting for these variables and the difference in interest rates, this home is actually more affordable to the typical Arlington resident than it was in 1976. This house is literally more affordable for the median household after adjusting for household size than when the “boomers” you dislike bought it bought it in 1976. |
Anonymous
| You don't have to buy in Arlington. |
Anonymous
| You're forgetting econ 101. Supply and demand. There is no more land available in the close in burbs. The only option is to increase density to increase supply. Absent that, demand is higher than supply = increasing price pressure. |
Anonymous
Was gonna say, OP sounds as if they're butthurt that they can't afford to live in a desirable area. What a sad individual. |
Anonymous
| Arlington wasn't as desirable place to live back then. It became more popular in the late 90's. |
Anonymous
Excuse me, I thought there was no fact-checking in these threads. </Vance> |
Anonymous
Why would you adjust for household size, which I assumes includes the people who live in all the new apartment buildings in Arlington. My parents bought a house in a desirable nyc suburb for $100K in the early 80s and sold it for $1.2M in 2010. Their income definitely did not increase ten-fold during that time period. |
Anonymous
You're being disingenuous or wishcasting. The PP is playing games with numbers to try to refute the OP when at the end of the day Arlington is substantially more expensive, when when adjusting for inflation. In the 70s Arlington was a basic middle class suburb for middling government employees, it did not have any cachet till the mid to late 90s. What happened? The population of the DMV exploded, the population of the US nationally had gained 100+ million since the 70s, the supply of buildable land for large new subdivisions ran out, greater affluence among the upper 10% meant more dollars chasing the same limited supply. On top of it, household sizes did also decrease meaning even more demand. Real estate in the 70s was just a different world entirely. The 70s also had a different basket of goods than we do today and everything we spend is affected by the other items in the basket. To use as a commonly cited example, the people starting out in the 70s didn't have the kind of high educational costs we do today. On the flip side, you could also point out that the mid 70s to early 80s had high unemployment too and it was a struggle to find jobs. So there are winners and losers. But one of the losers has generally been young people getting on the housing ladder in high cost regions. |
Anonymous
That is an anecdotal example and it’s definitely not the norm for most places in the US or even the NYC metro area. Interest rates were 10-12% in the 1980’s and now rates are around 7%. So the cost to borrow money is lower than it was when your parents bought it. Yes, you need to adjust for household size because there are many more people living by themselves or in small family units. The average person has more space than they did before. To the extent houses are more expensive because people have higher expectations and want more bedrooms, more sq ft per person that is not an affordability issue, that is an increase in consumer expectations. |
Anonymous
| You are also forgetting stock market. The DJIA is up like 45 times since 1976. My downpayment money be way up more even in a boring 60/40 fund |
Anonymous
I had to take your post apart because you touch on a few true enough items but other aspects of it is made up babble that doesn't logically arrive at your conclusion. Real estate is expensive because there is much more demand for the same limited supply of goods. Arlington went from a modest suburb to an expensive suburb because of limited supply in close proximity to DC. Small houses in Arlington are more expensive than much bigger houses further away. The US is not building on the scale it did in the 60s, 70s and 80s despite a much larger population, in part because we don't have large supply of buildable land near major cities outside the sunbelt, which seems to continue to keep building in rings after rings and as such continue to remain more affordable than the coastal cities, where both supply of land and heavy handed land preservation regulations have killed large scale new construction. California is a good example. Housing prices were more uniform nationally in the 1970s. You could move from Buffalo to Los Angeles or Atlanta to Boston and buy comparable housing. Not any more! |
Anonymous
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Had they rented the house, they'd have nearly 4 million right now provided they invested down payment into S&P and money spent on repair, taxes, insurance. That's conservative guess actually by the way.
This is the reason I sold all three properties 5 years ago, put the money into market and retired. I'm renting now and love it. I may buy again one day but not in next 3 years. |
Anonymous
| You choose to buy and you choose to get in bidding wars. We did neither. |