Finances in the Golden Era and today

[Lincsong]

The problem is that you would then live in Stockton and be about 45 minutes away from where you could get a decent job. Maybe things have changed there but it was fairly bucolic last time I was there.
You are really not comparing apples with apples there. You couldn't get anything like that here for the money. [huh]

You can get it on 86th Avenue in Oakland!!! What don't you understand about that? It's not written in stone any where that a person is entitled to a brand new house. Anyway, it's not the cost versus the yearly wage it's whether or not the monthly payment is no more than 25% of a person's monthly salary. Anyway compare what a $4,000 house in 1946 would have entailed..

1. Two Bedrooms and one bathroom
2. Single Car Garage
3. No Insulation, double pane windows.
4. No appliances
5. No carpeting
6. No finished yard
7. No fencing around the yard
8.800 square feet
9.No more than two electrical sockets per room.
10.No 220 volt plugs in either the kitchen or garage.
11.No circuit breakers, probably six fuses in the box
13. No grounded plugs

For $4,000 in 1946 the purchaser of said "house" basically got a roof over his head with two doors. Mobile homes aren't even built that spartan today.

So for instance if you take a $143,000 mortgage, with 20% down ($28,000) at 4.3% fixed interest,and a 30 year loan the monthly payment would be $571. A payment someone making $2000 to $2500 per month can easily afford.

Now take a $5,600 house in 1946, with 20% down ($1,000), at 2% over 25 years the monthly payment comes out to around $26 per month. Making $1 an hour is $40 a week, $160 a month.

The post-war years were also highly inflationary;

http://people.wku.edu/brian.strow/inflation.html

1946; 8.37%
1947; 14.59%
1948; 7.87%

So your dollar didn't buy that much in that time frame.

 

[nobodyspecial]

"For $4,000 in 1946 the purchaser of said "house" basically got a roof over his head with two doors. Mobile homes aren't even built that spartan today."

Your post rasies goods points and illustrates why comparing one era to another is rather hard. Minimum living standards change, for the better, over time as do building codes. In today's world the same 800 square foot house would have insulation, more efficient windows, modern wiring, wall to wall carpet, etc. making for a much more livable home.

 

[MissHannah]

I think housing prices will have to keep coming down. I don't see how banks could continue making mortgages all out of proportion with borrowers' incomes.

In the UK they have stopped lending more than about 5 times annual salary (they were lending up to 7) and you now have to have a 20% deposit. This means that nobody can buy anything of course but it will hopefully bring down the house prices. I went to a mortgage adviser recently. With the deposit I have I can get a mortgage for £90,000. Which would buy me precisely nothing. I'd need around £180,000- £200,000 for a 1 bed apartment so even if I wanted to buy with my partner we'd be in a small 1 bed/studio flat.

 

[Foofoogal]

Lincsong
----------

I need you for my accounting. To take it all into account. lol

 

[Paisley]

So for instance if you take a $143,000 mortgage, with 20% down ($28,000) at 4.3% fixed interest,and a 30 year loan the monthly payment would be $571. A payment someone making $2000 to $2500 per month can easily afford.

I think you meant to write "$143,000 house," making it, with the 20% down payment, a $115,000 mortgage.

A $571 principal and interest payment may be within the means of someone making, let's say, $2000 per month. But to that $571, you have to add property tax, homeowner's insurance, trash pickup, water, gas and electricity and any HOA fees. In the Denver area, that will bring you up to around $760 a month for a $140,000 house. That doesn't include any maintenance on the property. If someone making $2000 a month nets $1,800, they'll be spending over 40% of their take-home pay just to have utilities and a roof over their head. That $1040 left over sounds like a lot until you have a $1000 car repair bill or you need a new water heater or you have to go to the emergency room with no health insurance. And then lose your job. That's not hypothetical--I've been through it all.

Let's say the person making $2,000 a month looks for a home selling for no more than $60,000, puts down 20% and gets a mortgage of $48,000. Their payment on a 30-year, 4.3% fixed interest loan would be $237. I estimate that including all expenses I listed above, it would cost $360 a month to live in the house. That's around 20% of their take-home pay. Maintenance costs will be less, too. They'll ride out those inevitable hiccups a lot better.

 

[Puzzicato]

The problem is that you would then live in Stockton and be about 45 minutes away from where you could get a decent job. Maybe things have changed there but it was fairly bucolic last time I was there.
You are really not comparing apples with apples there. You couldn't get anything like that here for the money. [huh]

I would kill (or at least maim) to be able to live 45 minutes from my job! But we have chosen a quality of life that means we (rent) live more than an hour away from where I work.

 

[57plymouth]

I would kill (or at least maim) to be able to live 45 minutes from my job! But we have chosen a quality of life that means we (rent) live more than an hour away from where I work.

Work? What's that? I have not worked in 3.5 years. (I'm 34)

 

[jamespowers]

One of my cousins used to live in Ventura and work in LA. A 45-minute commute would have been an improvement for him. That's about how long it takes me to get to work on the bus (it stops every two blocks for seven miles).

I think housing prices will have to keep coming down. I don't see how banks could continue making mortgages all out of proportion with borrowers' incomes.

45 minutes!? Geez, I just don't have that much patience or time to waste. :eusa_doh: That and riding the bus here involves associating with people who might want to rob you more than they want to ride the bus. :eusa_doh:
Housing prices will come down but it all depends on where you are and what the demand in that area is for housing. Around here the supply is severly restricted by the no-growth types. That isn't gohng to change any time soon. It is also the reason why people buy houses out in Stockton as there are very few new houses being built around here. [huh]

 

[AmateisGal]

If I had to drive more than 20 minutes to work every day (that's about how long it takes me to get from my apartment to my job downtown), I don't think I could handle it.

As far as housing, yeah, we want to buy again, but I gotta say, after owning a home and now living in an apartment again, it is SO NICE to call management and say, "Such and such is broke. Come fix it." and I don't have to worry about paying for it. That being said, we do want to own a house again, but not for a good 2-3 years.

 

[jamespowers]

I think you meant to write "$143,000 house," making it, with the 20% down payment, a $115,000 mortgage.

A $571 principal and interest payment may be within the means of someone making, let's say, $2000 per month. But to that $571, you have to add property tax, homeowner's insurance, trash pickup, water, gas and electricity and any HOA fees. In the Denver area, that will bring you up to around $760 a month for a $140,000 house. That doesn't include any maintenance on the property. If someone making $2000 a month nets $1,800, they'll be spending over 40% of their take-home pay just to have utilities and a roof over their head. That $1040 left over sounds like a lot until you have a $1000 car repair bill or you need a new water heater or you have to go to the emergency room with no health insurance. And then lose your job. That's not hypothetical--I've been through it all.

Let's say the person making $2,000 a month looks for a home selling for no more than $60,000, puts down 20% and gets a mortgage of $48,000. Their payment on a 30-year, 4.3% fixed interest loan would be $237. I estimate that including all expenses I listed above, it would cost $360 a month to live in the house. That's around 20% of their take-home pay. Maintenance costs will be less, too. They'll ride out those inevitable hiccups a lot better.

Good luck finding a house out here for $60,000.
Your example is s good one. The cost of living more than makes up for any extras that a new house today offers over a house made in the 1940s. You could easily upgrade any 40s home for less than the cost of living increase we have had over the decades.

 

[Paisley]

There's actually a house in my neighborhood selling for $43,000. It's 380 square feet (about the size of a two-car garage), built in 1940 in a bungalow style. Off-street parking, even.

 

[davestlouis]

There's a house in my subdivision for sale too, but not for $43K...
http://www.realtor.com/realestatean..._Lake-St-Louis_MO_63367_1117908062?source=web

It's $14.9 million, which is a smidge out of my budget.

This really is an out-of-control example of the tendency to build bigger and bigger homes in the US...who needs 40,000 sq ft? For that matter, does a normal family even need 5,000 sq ft?

 

[Paisley]

Within walking distance and on the same street as the $43,000 house are new half-million dollar townhouses in one direction and older million dollar estates in the other. And some other places nearby that are real dumps. That's the Denver area for you.

Re: family needs, my mother has said that my little house is nicer and bigger than a lot of the places she raised my brothers and sisters in. Almost any house or apartment in the U.S. is nicer than most living quarters around the world. Hernando de Soto has hypothesized that one reason so many people live in such poor housing in developing countries is because of their property laws.

 

[Lincsong]

Good points there Paisley.

Oh, look, here's a 1940's vintage home in Oakland, CA for $75,000

http://www.realtor.com/realestateandhomes-detail/1301-78Th-Av_Oakland_CA_94621_1116967147

 

[jamespowers]

Good points there Paisley.

Oh, look, here's a 1940's vintage home in Oakland, CA for $75,000

http://www.realtor.com/realestateandhomes-detail/1301-78Th-Av_Oakland_CA_94621_1116967147

In the ghetto again.

 

[jamespowers]

There's actually a house in my neighborhood selling for $43,000. It's 380 square feet (about the size of a two-car garage), built in 1940 in a bungalow style. Off-street parking, even.

Man that is small! The same thing here would easily go for twice as much. :eusa_doh:

 

[jamespowers]

Within walking distance and on the same street as the $43,000 house are new half-million dollar townhouses in one direction and older million dollar estates in the other. And some other places nearby that are real dumps. That's the Denver area for you.

Re: family needs, my mother has said that my little house is nicer and bigger than a lot of the places she raised my brothers and sisters in. Almost any house or apartment in the U.S. is nicer than most living quarters around the world. Hernando de Soto has hypothesized that one reason so many people live in such poor housing in developing countries is because of their property laws.

You have quite a mix of housing there. :eusa_doh:
I suppose the best house to live in would be one with good parents.
Property laws not only screw up housing in developing countries but they drive up the prices in the US. All the regulations can make up one quarter the cost of housing in a given area---it does in this area after the developers pay school taxes, city taxes, permit fees and tons of others I can't remember now. :eusa_doh:

 

[Lincsong]

In the ghetto again.

But it's very vintage and it's what one got for $4,000 in 1946.

 

[lareine]

This thread makes me very grateful for what life handed me. I went to university in the UK (saving me thousands compared to all you American students, as my tuition was free) and I wasn't eligible for a student loan (forcing me to work part-time during uni, but keeping me debt-free). My husband and I have two mortgages to pay, but the second house is on the far side of the world where interest rates have crashed through the floor so our tenants there pay for the house there. We don't earn much here but manage to keep debt-free apart from the mortgages.

Our house in the UK, which our friends envied because we had parking space, a garden, and three bedrooms, is tiny compared to houses in New Zealand. For example, a small double bed barely fit in the master bedroom and we had to shuffle sideways to walk around it on two sides -- but it did fit. I thought I was very lucky at the time but now I'm not sure I could go back to it. It's amazing what we will accept as a good thing until we try something better!

 

[jamespowers]

But it's very vintage and it's what one got for $4,000 in 1946.

But the neighborhood changed around it devaluing the properties. I don't think they were worried about getting shot in the head walking out the door in 1946. You also didn't have crime sky high and a murder rate three times the national average either. :eusa_doh: