No Wonder Home Buying is so Tough

United States
April 1, 2016 9:43am CST
Sometimes friends of mine share articles they discovered on Facebook. Usually I can tell who posted what, but not always. Someone whom I do not know posted an interesting graphic this morning. I don’t know how that is possible, since my account is accessible to very few people. But what I read was fascinating. The chart that was posted showed the 1970 Cost of Living in the U.S. The average price of a new home was $23,450. The average income at the same time was only $9,400. This made the cost of a home pretty much in line with what people can afford, which is about three times their salary. The last year in which this information is available for the U.S. is 2014. Things have changed, but not in a good way. Although salaries average $53,657, home prices average $188,900. This means that salaries have increased by 175% while home prices have skyrocketed by 443%. No wonder people find it difficult, if not impossible to buy a house now. Three times the present average salary is $160,971, which is well below what they cost. Where I live the numbers are higher. The average salary here is $73,560. You would think that would make home buying easier. But you would be wrong, because the average price of a home in the area is $591,000. This is eight times income. If experts wonder why no one is in malls anymore, it isn’t just because we are shopping online. It is also because disposable income has disappeared. The cost of buying (or renting for that matter) a home in the U.S. takes up a huge percent of take home pay now. There’s nothing left. What are the stats where you live?
24 people like this
23 responses
@WorDazza (9082)
• Manchester, England
1 Apr 16
UK figures for 1015 show the average house in the UK costs 8.8 times the average UK salary. In parts of London (Kensington and Chelsea) the average house price is 38.8 times the average UK salary. From memory, the average UK salary is about £27000 per year (About $38000 at current exchange rates).
4 people like this
• United States
1 Apr 16
So people are doing what to live somewhere? Multiple families in one house?
2 people like this
@WorDazza (9082)
• Manchester, England
1 Apr 16
@ElizabethWallace People are living with their parents for longer. I believe the average age for moving out is now upwards of 30. It also takes two salaries to get anywhere near affording a mortgage so in most households both parents are working full time. There are still areas of the country where a decent three bedroom house will maybe cost about 5 times average salary but these tend to be areas where there are less jobs so consequently salaries are lower. There is also nowhere near enough social housing and renting from private landlords is almost as expensive as getting a mortgage on the property you'd be renting, meaning you don't really have an opportunity to save for a bigger deposit for a house!! Not a good time to be a young person in the UK starting out on their working life.
3 people like this
• United States
1 Apr 16
@WorDazza The problem with both parents needing to be working to support the household is that the cost of daycare makes it end up to be about the same as when only one parent works. It is like the second parent is just working to pay for daycare and transportation expenses.
2 people like this
• United States
1 Apr 16
Not sure what the stats are here Elizabeth but I do know that Denver is a high rent city. I am not sure how anyone affords to home buy here as the prices are outrageous, but compared to other cities, Denver is not expensive. I know in the last year, the rents have skyrocketed.
3 people like this
• United States
1 Apr 16
Greed is making it harder on families than it should be. Whatever happened to the control of the banks we were promised when they messed up the economy so badly a few years ago?
1 person likes this
• United States
1 Apr 16
@ElizabethWallace Yeah what about that? I remember all that Elizabeth..seems nothing has changed. Btw here is some stats I found for here where I live:
Denver Realtor Reviews: Real Estate Market Statistics January 2016 February 1, 2016 by Denver Realtor And Denver Real Estate Agent Leave a Comment The average price for a home in Denver was $370,351 at the end of January 2016. The median price for a home i
1 person likes this
• United States
1 Apr 16
@TiarasOceanView These prices are not terrible, but what about salaries?
1 person likes this
@LadyDuck (131273)
• Switzerland
1 Apr 16
The situation here in Switzerland is the same, the prices are still rising and people cannot afford anymore to buy.
3 people like this
• United States
1 Apr 16
It just does not make sense to me. During the huge bubble in 2006 or so, I asked a realtor how prices could be so high, when so few people made over $100,000 per year. She said the banks were letting them have sub-prime loans, and they did not have to show income. Crazy.
2 people like this
@LadyDuck (131273)
• Switzerland
1 Apr 16
@ElizabethWallace This is what has created the crisis and until they will do this the economy will not become better.
2 people like this
• United States
1 Apr 16
@LadyDuck It take guts to do the right thing, but few politicians have them.
1 person likes this
@jaboUK (52063)
• United Kingdom
1 Apr 16
I see @WorDazza has given you the figures for the UK - is it any wonder that young people can't afford their own homes?
3 people like this
• United States
1 Apr 16
If nothing is done, then people will have to live in communes. Ick.
1 person likes this
@fishtiger58 (30572)
• Momence, Illinois
1 Apr 16
I'm not sure of the stats around here but we got our house for 50 k, If I moved this house to California it would run 2 or 300 thousand I'm sure.
2 people like this
• United States
1 Apr 16
No, it would be much more. There are no houses that cost $200K. Houses that cost $300+K in California are in gang areas. No one would move there, unless they had too do so.
1 person likes this
@fishtiger58 (30572)
• Momence, Illinois
1 Apr 16
@ElizabethWallace I was trying to be conservative lol. It's all about location location location.
1 person likes this
• United States
2 Apr 16
@fishtiger58 Yes, it certainly is. I pay more to live where I do, but the area is lovely with fabulous weather, low crime and nice people.
1 person likes this
@Marcyaz (35954)
• United States
1 Apr 16
Of course what your salary is depends on what type of work you do. Here the average salary per year is around $51,000 and homes average around $87,000.
2 people like this
• United States
1 Apr 16
I find this hard to believe. Your average home prices are less than double average annual income? That is unheard of. Where are you?
1 person likes this
@Marcyaz (35954)
• United States
2 Apr 16
@ElizabethWallace I'm in a very small town in Minnesota. It is not unheard of here.
2 people like this
• United States
2 Apr 16
@Marcyaz Okay. Thanks. I know there are pockets of places where the home prices are very low, but I was unaware that the salaries did not match.
@cindiowens (3895)
• North Myrtle Beach, South Carolina
1 Apr 16
I live in a tourist town, so a good deal of the jobs here are minimum wage salaries in entertainment and food services and motel staff. However, we looked at a PROPERTY without a home built on it yet, and they wanted $900,000 for it. I guess they will keep it for a while.
2 people like this
• United States
1 Apr 16
I used to live in a resort community too, Marina del Rey. Prices were and still are quite high. At least, when you have no disposable income, you can still enjoy walking at the beach. At least that is still free (if you don't count parking).
2 people like this
• North Myrtle Beach, South Carolina
1 Apr 16
@ElizabethWallace Fortunately, parking is still free in my area, that is if you can find a space. We usually ride the golf cart down, so parking is much easier.
1 person likes this
• United States
2 Apr 16
@cindiowens When I lived in the marina, walking was possible, because the area was so small. But during the weekend, we usually left the area if we wanted to have fun, because the tourists took over.
• United States
1 Apr 16
I am not sure exactly what the stats are here, but I think that they are about what you have said. I believe that the home prices are actually somewhere in the middle between the high and low prices that you have listed. Unfortunately, I think that the average salary is more in line with the $50,000 average, though.
1 person likes this
• United States
1 Apr 16
So what do the government bureaucrats who run HUD and other real estate oriented programs expect people to do? Live on the streets?
1 person likes this
• United States
1 Apr 16
@ElizabethWallace I am not sure that they care. Low interest rates help, especially when they are locked in for the duration of the mortgage. However, when the interest rates rise, it even further reduces the number of people who can afford to buy a home. Then again, it is not much cheaper to rent, and you do not have the equity that you build up in owning your own home. I know that they have had to open several shelters in recent years, because the homeless population is on the rise and so were weather related deaths. When the temperature dips below a certain level, raises above a certain level or we have certain weather conditions, then these shelters open to give homeless a safe place to go.
1 person likes this
• United States
2 Apr 16
@purplealabaster It isn't just the working poor that cannot buy homes. Most people, especially singles do not have the downpayment for a home costing eight times their salaries. It's nut. Three times was and is possible, but when the price is so high, the interest rate does not matter.
1 person likes this
@miniam (9272)
• Bern, Switzerland
2 Apr 16
It`s much worse here,taxes are too high,cost of living way over what most can afford and home buying? well,most people do not even dream of owning homes unless they win the lottery.
1 person likes this
• United States
2 Apr 16
This is all very sad. How did all of this get turned upside down? I wonder if it will ever be sane anymore.
• Eugene, Oregon
1 Apr 16
Our market here in Eugene is tight, but Portland, where my daughter lives, is out of site. The population is booming and the average house gained 12% in the last year. She is actually making an offer on a tiny place in a good area for an exorbitant price. We are going up for the inspection tomorrow.
1 person likes this
• United States
1 Apr 16
I find all of this terribly depressing.
1 person likes this
@irishidid (8524)
• United States
1 Apr 16
That's only tip of the iceberg. You also have to consider credit scores. They can be another hindrance to buying a house.
1 person likes this
• United States
1 Apr 16
People have control over their credit scores. They have no control over the housing market. Greater forces are at play there. The movie The Big Short explains the scam which was run (and is still being run) on people.
@Asylum (48357)
• Manchester, England
1 Apr 16
Obviously house prices have risen sharply over the years in England, but so have wages. To be honest I cannot say for certain whether the two figures balance or houses have become disproportionate.
1 person likes this
• United States
1 Apr 16
@WorDazza has numbers. It looks like your multiple factor is almost nine times salary. This would leave very little for utilities or food.
1 person likes this
@vandana7 (59000)
• India
10 Apr 16
There are many factors that go into such comparison of course. Average amenities would have changed from 1970's to 2014. Those would have become standard norms in homes which was not the case back in 1970's. Size of home, quality of materials used to build homes, etc., need to be considered, as also proximity to the city or place of employment and other facilities like health care, entertainment, etc. Out here, in 1985 I bought a home for dad. Overall cost of land for that home was 40000 INR, and construction cost for about 800 sft building may have come to another 100000 INR. Total 140000. My salary back then was measly Rs.325/- per month but age was on my side, and we got the loan based on some land income which could not have been more than 3000 INR per month. Going was tough with the loan EMIs. Fast forward after real estate boom, that house was sold. Today it would cost about 12500000 INR. Our income has touched about Rs.100000 per month. In dollar terms at today's rates The house cost me $2,121 or so back then, and my income was merely around $50 or so. Annual - $600 to 3.5 years income equivalent. Today it is about $1,89.393. As to income Rs.18,181 per annum. That is more than 10.41 years income. But as I said, back then it was in outskirts, people took turns for security, water would log in, it was pretty much a village life, and the boom is essentially because of new plans due to software. Comparison needs to be of equal level. Number of large homes back then may have been fewer. Now more people may be able to afford larger homes. I find me more comfortable now than I was back then. Thanks to real estate boom of course. And this lowering of income is inevitable with increase in population because income gets divided across larger set of people.
@mom210 (6168)
• Atlanta, Georgia
8 Apr 16
Wow that is a hefty price for a home. We bought our first home when we were in TN for $50,000. We were stunned to buy our next home in GA for double that.
• United States
5 Apr 16
When I was living in NY the prices of houses were ridiculously expensive for just a plain ordinary house. Moving to PA the prices are more realistic for the same type of house
@jstory07 (61223)
• Roseburg, Oregon
5 Apr 16
In 1969 my dad retired from the Army and came to Colorado. He bought his house for $18,000 and only needed an income of $100 per week to buy the house. The house would now be eorth over $200,000
@MarymargII (8731)
• Toronto, Ontario
5 Apr 16
You're right- it is getting worse- I read a headline somewhere that said: Could you buy your home today? Hard for young people starting out too!
@BelleStarr (34940)
• Portland, Connecticut
4 Apr 16
Not as high as yours but while income is high in Connecticut, the price of homes is too but not nearly as bad as 8 or 10 years ago. A lot of people are upside down on their mortgages and can't sell their homes without taking a huge loss. My daughter falls into this category!!
@DianneN (66734)
• United States
4 Apr 16
I don't know the stats, but I do know that our town is very wealthy, and most are screenwriters, playwrights, doctors and professors at Yale, lawyers, and business men. The homes are huge and out of the price ranges for most, especially young families just starting out. I'm thrilled that both my sons earn a very good living and can afford their own homes.
@lilnana1111 (2449)
• United States
3 Apr 16
I don't know, but I don't think I want to know, it's too depressing.