Reply to Example of how housing prices have far outpaced inflation

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]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.[/quote]

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. [/quote]

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.[/quote] 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.[/quote]

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