I am not sure what is the value of comparing the price of anything “adjusted for inflation” anymore to be honest - because an average salary, if it were “adjusted for inflation”, would be far larger than what you encounter in reality.
Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
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Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#22I’m thinking out loud here but: Lets game this out. Let’s say that interest rates go up significantly- say, to 12% or something. Ok, so then naively you would probably expect house prices to fall, because people won’t be able to make payments otherwise.
But what if you’re someone who bought a house in the low rates/high price era. Are you going to sell? No, because your mortgage is underwater- you can’t afford to sell. Or let’s say you’re one of those investment firms buying up everything. Can they sell? Not really, because again, they’d be technically insolvent as their debts would be much more than their assets. They paid cash for an asset and they won’t sell that asset at a loss.
So, if nobody is selling, do prices actually fall? Maybe not! In that case, financing a house for a first time homebuyer becomes truly impossible- high prices and high rates. The only buying that will get done is for cash, by the investment firms which own a lot of their housing stock outright, and have rental income to supply cash to buy even more of them. Interest rates don’t matter when you can pay cash.
So my prediction is that in a high rate/high price market, the era when a family could own their own home is coming to a swift close.
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#23These summary stats mask a huge amount of regional variation. My parents bought their house in a Midwestern suburb in the early 80s for about 100k, or 270K today. The house is worth 300k today, a 9% increase over 40 years. Meanwhile my West Coast home in has increased in value 33% in the 10 years I've owned it accounting for inflation, or 250% since it was built in the late 1990s. My parents house is a small fraction…
My Midwestern suburb home has gone up in value about 33% in the 4 years I've owned it (accounting for inflation, without taking it into consideration it's gone up ~50%), so yeah, very regional.
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#24Earlier quoted context omitted.
This article says homes are 74% larger, but compares to 1910. Not sure why the cost per household member should matter all. I didn’t get a family size discount on my home.
> I didn’t get a family size discount on my home You do though. The cost of kitchen for a couple without kids, and one for a family of 5 is roughly the same. You might have more square footage overall for house, with more people, but the construction costs are concentrated on the shared spaces like kitchens or even things like living living rooms where square footage will scale sub-linearly with the number of people…
That's literally not a discount though.
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#25What has the square footage and amenities for single family homes done over the same time frame? You aren't comparing apples to apples... https://www.propertyshark.com/Real-Estate-Reports/2016/09/08... Not to mention the average household size (number of people) has been dropping...so the square foot per household member is up drastically...
Not an expert, but I did read the article. The point of the "Case-Shiller" metric is that it is computed on the basis of the same exact property changing hands in different time periods. That way it controls for trends in the product pool.
Or as the article put it: Case-Shiller requires two transactions for the same house,” Lazzara said... It controls for the variability in the quality and size of the homes sold from year to year by measuring the change between houses that sold in one period with the prices of the same houses when they last changed owners. “The repeat sales mechanism is a way of adjusting for the mix of product so that you really are getting an apples-to-apples comparison,” Lazzara said.
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#26Are these prices also adjusted for interest rates? Cost of borrowing in 1987 was 10% compared to today at 3%.
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#27Are these prices also adjusted for interest rates? Cost of borrowing in 1987 was 10% compared to today at 3%.
Cost of borrowing is already back to 5%
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#28I bought my home in the middle of nowhere in New England four years ago for $220k. I could sell it tomorrow for $400k. If I wanted to test my luck, I'd be able to sell it in 2-3 months for $450/500k. The median _family_ income for my area is $52k/year (2007-2011). Things are fucked for the average person. I keep coming back to the Player Piano[0]. It really is the "Reeks and Wrecks" vs. the Doctors. [0] ( https://en.…
You could sell your house for twice as much but you will have to pay twice as much to buy a new one.
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#29I’m thinking out loud here but: Lets game this out. Let’s say that interest rates go up significantly- say, to 12% or something. Ok, so then naively you would probably expect house prices to fall, because people won’t be able to make payments otherwise. But what if you’re someone who bought a house in the low rates/high price era. Are you going to sell? No, because your mortgage is underwater- you can’t afford to sel…
Life forces home sales. Change of jobs, loss of job, retirement, marriage, divorce, and death are all common reasons people move. If you’re underwater in these situations it forces either a short sale or foreclosure and eventual bank sale. You are correct that people won’t want to sell, but circumstances will force enough hands that it happens. Then you might start getting in a situation where if it drops enough people will walk away instead of being so underwater causing more foreclosures.
Re: Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987
#30We bought our first home last year at a 3% interest rate. The price is up 45% one year later. If we had to buy that same house today with todays interest rate our mortage payment would be double. This is deeply unfair to people who don’t own homes.
(Comfortably) Owning a home is a key part of the American dream. We need an Elon Musk for housing. So many of societies problems can be traced to high housing cost.