Related Posts
How much should a shift lead make west coast
Hi! Excited we have a space finally :)
How do you all role out your ERG
Additional Posts in Consulting
Returning to work tomorrow like...
New to Fishbowl?
Download the Fishbowl app to
unlock all discussions on Fishbowl.
unlock all discussions on Fishbowl.
Chief
And you could buy a new Ford truck for $1800. But neither the 1965 truck, nor the 1965 home had the amenities of their 2021 counterparts, so comparing costs now and then are meaningless
1965 the average home was $20,000 and 1239 square ft. In 2021 dollars thats around $200,000 in 2021. I did a search today for 1000 to 1250 Sq feet in Chicago 200k or less. 774 of them. So you can get the equivalent home for equivalent dollars. You just don't want the equivalent of a 1964 track home
Chief
Acc. I totally accept that his parents 20000 house in 1965 might sell for 285k which is a 700% increase. But that is not adjusted for inflation. A 700% increase adjusted for inflation is over 4 million.
A bunch of reasons…
“Average” home today is a lot bigger and nicer than what was available in 1965. That’s a huge part of it.
There’s more supply of financing. Much easier to get a mortgage today and many more low/no down payment options. Plus probably lower mortgage interest rates today. That drives prices up.
Housing supply hasn’t kept up with demand for numerous reasons.
There’s more demand. A lot more people are able to buy today who would have been outright prevented from buying, or had a very hard time in 1965, such as minorities and single women.
Also more demand from foreign buyers, people buying 2nd+ homes, and investors.
Rising Star
I live in a neighborhood where most of the houses were built in the 50's and 60's and for the most part have not been expanded. Theyre between 1000-2000 sqft. Those homes were built by high paying union workers using high quality materials including real wood and brick. Not composite. The cost per square ft has gone up substantially.
In what part of the world is housing a free market?
In America it's incredibly regulated. Homeowners often vote (in their narrow financial self-interest) to restrict supply to increase their home's value. New development is very politically restricted. And even renovations/refurbishments are often subject to political caps.
Rising Star
Real estate is not a free market. It’s quite possibly the second most regulated sector, next to consumer products.
Pro
Not all wealth is taxable or reported to government. Did income really increase by 15%? Or did reported taxable income, when adjusted for inflation, increase by 15%. But the guy who bought a business, or rental real estate in 1965, just killed it
The population of the US went from 180 million to 350 million. The amount of land in the US went up by 0.
Chief
You are correct flagging population growth, but we have plenty of land. Just a shortage of housing on that land.
Rising Star
Why would income be tied to home ownership? Do the same analysis for cost of home ownership from 1920 to 1961
Rising Star
How is financing related to the cost of labor?
Pro
Supply versus demand
The population grew faster than housing supply
Pro
Mass immigration + housing regulations artificially restricting supply = people don't have affordable places to live
Baumols cost disease, regulatory compliance, and land costs
Houses are larger and more complicated than they were in 1965. They are also subject to substantially more regulations on stuff like materials, energy efficiency, fire safety, etc. IIRC the size of the median house has substantially increased, maybe by 50-76%?
A lot of US metros also have crazy NIMBY policymakers that make it hard to build new supply. Los Angeles and Boston are particularly notorious for this