Before Time Home Costs

By
eric
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77
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This is another chapter in the Before Time series of articles (here’s the last one) written by those who experienced those times for the sake of the edification of those who are too young to have experienced them and so have no knowledge of how things were, once.

My parents bought their first house in 1969 – in Stamford, CT. It was a split level in a nice suburban neighborhood, sitting on about a half-acre of land. They paid about $33,000 for it, equivalent in today’s devalued currency to about $300,000. I decided to check what the old house would cost today.

First, though, how about what it costs to not be evicted from it, today.

According to the latest public records data I could find, the annual property tax on the old house is currently $10,530. In other words, three years of property taxes on the old house in our time amounts to as much as my parents paid for the house back in the Before Time of 1969. In inflated-equivalent currency, it would come to about $2k per year, if my parents had been obliged to pay this rent (on top of their mortgage) with 1969 money. In five years’ time, they’d have had to pay a third again in rent – which is what “property taxes’ amount to – than they paid for the house.

As in the whole thing.

But they didn’t have to pay that much because it was 1969 – the Before Time – and both the taxes on the house and the house were affordable in those times.

Neither are today.

You have just read about the taxes on the house. How about the cost of house, itself? In these times, that is.

According to the latest Redfin estimate, the old house would list for $1.3 million if it were put on the market today. If that’s how much the house cost in 1969, my parents would have had to come up with about $150,000 in 1969 dollars, a or somewhere in between four and fives time as much as they had to come up with when they actually bought the house in ’69.

Which they were able to do because the house didn’t cost 4-5 times as much then as it does now.

Fast forward about 27 years to the time when I bought my first house, in the suburbs of Washington, DC.

It was possible for me to buy a house because it was still possible at the time – the 1990s – to buy a small house in the DC suburbs for around $170,000 or so. More finely, because it was possible for a young person to save up the 10 percent down payment that’s generally necessary to qualify for a home loan. In my case, this amounted to about $17,000. Not a small sum but also not an impossible sum. Save about $2,500 per year for about six years and you had enough to put down on the $170k house and that’s exactly what I did.

Because I could.

I looked up my first house on Redfin and discovered that if it were to be put on the market today, the asking price would be in the vicinity of $630k. That is an increase (unadjusted for devaluation) of $460k – nearly half a milion dollars – over about 28 years. Adjusted, it is a real-money (well, buying power of money) difference of about $300k, now vs. then.

Ten percent down today would mean $63,000 – an all-but-impossible sum for anyone who isn’t already the owner of a home (who can tap the inflated equity of their home to swing the down payment on a new home) to come up with on their own. It would take saving $10k for six years or $5k for 20, by which time a person in their 20s would be well into their 40s.

And then you’d have to pay the mortgage on a $630k first house. Plus the rent styled “property taxes.”

Mind, my first house was similar to my parents’ first house in that both houses were ordinary houses on small lots in what were then middle and working class subdivisions. But that was back when the middle and working class could afford to live in single family homes.

Who lives in my parents’ old house, today? Millionaires. Ipso facto. They are the only people who can afford to live in my parents’ old house, which conveys some sense of the devaluation of being a “millionaire” today.

Similarly, my old house. Whoever is living in it today is nearly a millionaire – at least on paper. What did they get for what they spent? A house built in 1971 that cost a third what my parents’ paid for theirs in ’69 because it wasn’t as nice a house. It had single pane windows and shag carpet and T-111 siding. But it was a great first house and I was grateful to be the owner of it.

Today – 20 years after I sold it – I could not afford to buy it again.

And I’m no longer a young guy in his 20s. So I have great sympathy for those who are in their 20s today, who look at the cost of a nothing-special average house – now around $400,000 – and have resigned themselves to never owning a house. But it’s important for them to understand it’s not the cost of houses that has gone ballistic so much as it is the cost of speculation in housing, which is now regarded as an investment – something to be flipped and cashed-out (rinse and repeat) rather than a place to live.

The mania began in earnest shortly after I bought my old house, thanks to the intercessions of The Chimp who also turned what used to be American into a “homeland” and flying commercial into Obedience Training.

Instead of saving up 10 percent, people who had zero percent (some with no income, either) were issued loans, which they assumed because they figured they could flip/cash out (and so, make out) before anyone figured it out.

This caused a speculative bubble that never truly popped. It just got a little smaller, for a little while. It is now bigger again – and likely to get even bigger, if Kamala Harris becomes the new “Decider.” Her promise to gift new home buyers $25k won’t make homes more affordable. It will increase what people are expected to pay for them, as sellers jack up their prices to cash in on the the new and easy money.

People in their 20s today have no memory of what it was like before all of this – which is the purpose of this remembrance. My first house may not have had granite countertops or triple pane Andersen windows. But it was my house – and I feel a sadness for the 20-somethings of today who will never know how that feels.

. . .

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Related posts:
  1. Hidden Costs That Cost a Lot
  2. The Home School You Pay For . . . Twice?
  3. The “Social Costs” of Buying New
  4. A Measure of How Bad it Really is
  5. Big Business? Or Big Government?

RELATED ARTICLESMORE FROM AUTHOR

77 COMMENTS

  2. Countrywide Financial’s Angelo Mozilo made off with millions after the collapse.

    Triggered the GFC. Something about Bear Stearns and Lehman Brothers, they’re always pulling that stuff.

    Michael Milken pulled the same stunt along with Ivan Boesky.

    You gotta go all Bernie Madoff, Chuck Ponzi would be envious.

    Lying liars always make a mess.

    Open your lying eyes.

    Blinded by the wars, are ya?

    Living in a dark age is so cool.

    Tony Blinken is insane.

  3. The Pager BOMB injury toll is now up to 8 dead, 2700 wounded. The implications are enormous. No airline can possible allow pagers, but what about cell phones or laptops that have these lithium ion batteries – which can be hacked and made to explode?

    How many people were assassinate by blowing the battery in a device before today? How many airplanes blown out of the sky by device batteries that can be made into a bomb by sending it a code? The fact is, every device could be a bomb. BTW I blew the whistle on the World Trade Center buildings being bombs, I wrote an article on VT how the WTC buildings had an explosive demolition system installed at time of construction:

    https://www.unz.com/article/israel-did-9-11/#comment-6760290

    “The general idea is this: in order to obtain a skyscraper building permit, the applicant must insure that the new building is not a threat to the existing real estate next to it. So the necessity of having a built-in demolition system, that if a hurricane, earthquake, or airplane were to cause the building to topple – the building would collapse straight down into it’s own footprint. But to maintain profits from renting the floors to businesses – they are not told of the risk, that the building itself is a pre-wired bomb. ”

    You all know many of us, like me, having been screaming from the rooftop ever since Michael Hastings was assassinated by his own car – his brand new Mercedes – which was sped into a tree and exploded burning him beyond recognition – and the day prior he said he was working on a story of a lifetime (like Watergate, but this time is was about Hillary). Do you all still remember Forbes went to LA and rented the same model Mercedes and had two techies hack the car from the back seat with their laptops?

  4. Similar to other stories in the comments, we bought our first house in 1976/1977 as newlyweds. 20% down on a $30500 house, culdesac we had the better lot as the 2nd house in we got the corner of the square the culdesac was dropped into, lot-wise.

    A simple but well built 1250 sq ft three bedroom rambler / rancher (nomenclature depending on your area of the country). We were able to save the 20% down by living in a one bedroom apartment for about six months – we bought from the owners and did a rent back for the six months till their new home was ready. Half our down was from savings we both brought into marriage and that six months allowed us to save another $3k. Parents helping? Unheard of in 1977.

    Closing costs – a modern grifting racket. Back then we qualified for a 7% rate on a 25 year loan. The bank was new to mortgage business and was glad to sign us up. Our total “closing costs” were under $700. No points, no PMI, no loan origination fee, no escrow as they did all of it in house and we had no other property deal, to, well, deal with. Fast forward to today, they will nick you six ways to Sunday with the junk fees for what should be the normal cost of doing business.

    Someone mentioned entitlement mentality. I don’t deny this exists however due to the degradation in society you have to be damn careful where you live renting or buying. Your safety could be in jeopardy, there is a reason in today’s world why that house seems like a bargain – watch out! You will probably end up paying a premium just to buy your way into a safer area. This is very true here in Washington state especially west of the Cascades. We left our first house after 12 years as the Federal Way WA area was obviously deteriorating after a nice run in the ‘70s and ‘80s.

    Daughter’s family of three bought and sold houses in N. Carolina and Alabama, Army family till 2019. Lost their shirts on both. Rented the N. Carolina house and spent thousands to fix the renters damage, and of course no legal system will punish the renters in modern America. Alabama house, on a golf course, great house and ‘hood. Golf course goes banko and their property never appreciated. 15 years of home ownership and $15k in the hole to show for it. They did buy here near us after a 6 month search & ended up buying the house they were renting. I spotted them half the down $$$ just to keep the outrageous payment somewhat reasonable.

    Nice system we’ve devolved into. Once the financial help from the boomer parents and grandparents dries up I have no idea how the next gen will ever afford this mess.

  5. “My parents bought their first house in 1969 – in Stamford, CT. It was a split level in a nice suburban neighborhood, sitting on about a half-acre of land. They paid about $33,000 for it, ”

    According to the latest Redfin estimate, the old house would list for $1.3 million if it were put on the market today. If that’s how much the house cost in 1969, my parents would have had to come up with about $150,000 in 1969 dollars”

    ———————-

    150,000/33,000 = 150/33 = 5

    That means Eric’s parents old house is 5x overvalued.

    The value of a home is 100 times the rent. Most homes are 3x to 5x overpriced.

    The reason for the bubble is that the Fed lowered rates to zero for a decade, creating an investor hyper bubble to get out of cash and to get leveraged in anticipation of future inflation and housing price rises.

    The real estate recession has started in some areas, like Florida:

    #1 real estate yourtuber

    https://www.youtube.com/@ReventureConsulting/videos

    • Plus nose rings and other metals on various body parts. I don’t have any tats or rings but If it makes one more appealing to the opposite sex, go for it.

      • Hi Roscoe,

        I dislike “tats.” It makes men look like low-class thugs and women look like low-class tramps. I know some will take issue with me and that’s fine. I’m only stating my opinion. I consider the now-widespread phenomenon of “tats” to be a visual symbol of the disintegration of the West. Rap being its musical accompaniment.

        • When we were kids Tattoo was that little dude shouting “The plane!” and people who had them couldn’t donate blood because they had hepatitis.

          Today I see sleeved millennials complain about how they can’t afford houses and think “yea, but your ink could have been a down payment.” I get it, some people get off on them, but I see a tatted woman and think she can’t budget or is sleeping with the tattoo artist.

          • Nobody really talks about the cost, but according to the internet, a single sleeve tattoo can cost between $1,500 and $6,000 depending on several factors. Apparently it can also take up to 80 hours to perform (not to mention the days of inconvenience and discomfort following each session).

            I regularly see people with sleeves, legs, backs, chests, necks and even faces covered. I can’t imagine how much of their time and money they’ve spent on such a ridiculous and counter-productive endeavor. It pains me to think of the opportunity cost of it all. It also indicates an incredible disrespect for one’s body.

          • Ditto that, RK –

            Tats were “outlaw” when only criminals, bikers and sailors sported them. Now that almost everyone under 40 has them, it just looks conformist – and gross. Tats are body graffiti – and look just as attractive as spray-canned “art” on the side of what was once a nice-looking building.

            • The three basic elements of music are Rhythm, Harmony and Melody. There’s usually plenty of rhythm in rap, but oftentimes is devoid of harmony or melody (or both).

              I think the best that can be said of rap is that it is spoken “poetry” over a beat of some sort. This was also done with beat poetry in the 1950s, but perhaps in a much less rhythmic way, and was always devoid of harmony and melody.

        • I got my one and only tattoo 30 years ago. I’m sure I’m the only one who thought it looked bad ass at the time, but it does look a lot tougher now that I have muscles. Back then I was skin and bone and NOT tough, LOL.

          Luckily I can hide it when I want. Back then, we had to go across state lines to get one. From a guy who ran his tattoo parlor out of a trailer home. Ah to be young and stupid again!

        • I finally got the translation correct for the “tramp stamp” above the chick’s ass crack.

          Those are ancient Polynesian symbols, translates to:

          “ WECOME ABOARD! “

          The one on the back of the neck?

          “ DON’T PULL MY HAIR I KNOW WHAT I’M DOING “

  7. I’m still living in the same house I bought over 30 years ago. It’s gone up in price about 700 percent now; not that it matters much since I don’t plan to sell but most newer homes cost more money so I’m not planning on moving.

    I’m not rich but once you don’t have to pay a mortgage it’s easier to live on a low income.

    • >I’m not rich but once you don’t have to pay a mortgage it’s easier to live on a low income.

      Copy that.
      No house payment, no car payment makes life a lot easier.
      Live well, and do it on the cheap, is my m.o.

      Bonus:
      The less money you need in order to live comfortably, the less you are required to pay to support the war machine. Buck the fozos.

  8. Howdy Eric!!

    Great topic. By the way, you don’t even have to go back that far to put things into perspective. Case in point. I was owned by a high-rise condo in Miami which I sold in January when I came to realize that I didn’t want to be owned by a home any longer.

    During a final conversation I had with a friend there, I cited her own case as an example. She closed out her mortgage about 5 years ago. I told her that her total nut back then – mortgage, taxes, and HOA/maintenance – was a certain amount. The kicker that I told her is that that it costs her more to live in the home NOW, WITHOUT a mortgage, than it did when she HAD a mortgage!!

    I asked her what that meant, rhetorically. Before she could muster up an answer, I told her that it means YOU DIDN’T BUY ANYTHING!! Your purchase has expired and now you are renting here. She nodded sheepishly and said, “you’re right.”

    I told her that I was not criticizing her, but to make her realize the folly of thinking that closing out your mortgage means you now own the home free and clear. The idea that it costs her more to live there without a mortgage than when she had one is patently absurd.

    One of the most important goals heading into retirement is a fully paid-for home so that living costs decrease in retirement. This goes COMPLETELY AGAINST that principle.

    And don’t even get me started on insurance …..

  9. The main cause of the before and after time price difference is large corporate ‘investors’ who have come to dominate the market. This was different from what happened in 2003-2008. That was driven by home buyer “subsidies’ like zero down payment and cuts in interest rates. This is different. In light of the largest run up in real mortgage rates and the highest real inflation rate in history, we have escalating home prices.

    It is true that in 1979-80 as prices never dropped. The difference that until after 79, incomes generally caught up with inflation, so the prices didn’t have to drop. In the 80’s incomes dropped due to the diminishing of labor bargaining power and junk bond fueled outsourcing that took place. Prices still stabalized and grew slowly.

    What we have today is corporate domination of the residential real estate market, which is being used to sever people’s ties to property ownership. Blackrock and companies like it have a 900 credit score where they get money for free as long as they buy and sit on single family housing. In Houston, TX, they own 21 percent of the residential housing market.

    The owners and operators of BlackRock are not accountable for their actions. UP goes their stock and they continue to buy buy buy.

    I noticed something strange in 2018 when I was trying to buy a house in Oklahoma. They had gotten their greedy hands in that market as they did Houston over 12 years ago.

    We are where we are.

    No presidential candidate is talking about it except for RFK.

    No one dares speak their name although everyone knows it.

    This is diffent

    • The slave owners…the control group own Blackrock, Vanguard and State Street, …which owns 80%? of the SP500…Blackrock, Vanguard and State Street, also own a lot of residential real estate…

      The government…a branch of the control group…charges home non owners rent called property tax….the government…the control group…. is…will be your landlord….

  10. Another cost of home ownership that’s gone through the roof (maybe due to home values skyrocketing) is home owner’s insurance. My sister’s went up 50% in one year!

  11. Hi Eric,
    Our experience is similar to your parents, we bought our house for $33k in 1974; at that time we needed a 20% down payment and the mortgage rate was 7%. I already had my own apartment so when we got married my wife moved in with me and we lived off my salary while banking hers for our eventual house purchase. I forget what the property taxes were back then but our whole monthly payment – P,I,&T was $350 on a 20 year mortgage. We looked to move into a bigger place around 1984 after a couple kids but at that time prices were getting ridiculous so we stayed put and had an addition put on the back. Fifty years down the road and we’re still here, house paid off but paying the property tax “rent” in excess of $13k/year for a house supposedly worth $1.2 million. Have been looking for a smaller place to downsize to but even the smaller houses are asking over a million or they get bought by developers and turned into McMansions. So it looks like we’ll just stay here until one of us croaks or get put into a nursing home and then the state will go ahead and steal all the assets we worked our whole lives for.

    • That was right depressing, Mike, especially that $13k/year part. I think it was OppositeLock that said he was paying something like $20k/year.

      I truly don’t know how having more buildings on my property, or them being valued higher, means I should be paying more in property taxes. Of course, property taxes themselves are an affront to freedom.

      But now we have a new “freedom”. The freedom of servitude.

  13. 10% down! I wish! Most of the homes in my “Before Time” required 20% down for a FHA loan. Then the payment could not exceed 20% of gross income. Houses were in the $30-50,000 range.

    Then came the decapitation. Nixon removed the link to gold. It was all over but the crying. Money was now linked to industrial and other types of national output. Today we’re crying. Without production,,, shipped to China,,, the money is worthless. Of course Corpgov lies about GDP. It even includes the money it stole and borrowed when calculating GDP. That way the more it prints and spends,,, the higher the GDP! All bullshit of course but Americans love bullshit. One look at the presidential candidates proves that. HL Mencken was right!

    The house next to me,,, an old cheap Jim Walters house (for those that can remember) Cheap is the operative. The owners added a couple of rooms. It sits on blocks. Asking $290,000 for it. It does have a pool which is great for showmanship. $1500 fake monopoly bucks a year for for county rent.

    Minimum wage when a child was 0.50 cents per hour. Today many states have it at $20. The federal is around $8

    They are destroying the money as fast as they can to impoverish us even more and at a faster rate.

    A trillion every 90 days now. I know maff is racist in our great nation but put your thinking cap on. Shouldn’t take too long before the dollar gets to zero even domestically. Nothing is free. Every time Corpgov sends a check,,, fills a debit card,,, pays the rent of that newly printed money to our valued beloved newcomers that can do no wrong,,, your dollars are worth less.

    Jobs? Only Foreign born and corpgov showed any increase in number of jobs. Witless white citizens actually lost jobs over the last five years. Moronic White women are killing their gestating children faster than ever. I know the stats don’t show it but do you really expect them to tell the truth? Like they constantly harp that the Blacks on;y comprise 12 percent. More like 30-40 percent. Do you really expect the truth!

    Check out Springfield Ohio. The Fbi was sent to shut up the local citizens that complained about being saturated by a culture of death and voodoo. Worse,,, They do it! The very definition of a traitor.

    Like Europe,,, Americans have lost their country. Its gone…. stick a fork in it. But I imagine the last Whitey will scream…. “I didn’t know!”

    Want a visual? Look at Rhodesia,,, South Africa. Look at France, England, Germany, rape capital of the world Sweden, Italy Ireland, Australia, NZ etc.

  15. Though the general premise is valid (Homes more expensive due to inflation and regulation) there are still plenty of opportunities for the young.

    Entitlement behavior is a HUGE part of the issue.

    The young now think their first house HAS to be in a desirable location, with multi-car garages, granite counters, wood floors, etc.

    Two years ago I sold a home we bought in 1998 for $140k for $230k. So 23 years later and the price had not even doubled. During that time there were serious upgrades done to the bathroom, basement refinished, paver patio installed.

    It is in a decent suburb of Metro-Detroit.

    Plenty of good paying jobs available in that area. Reasonably low crime. Well kept working class neighborhood. Affordable property tax.

    It sold to a younger millennial woman.

    I’m not saying this is the case everywhere, only that if you insist on living in expensive places like CT, The DC swamp, San Fran, etc, that you limit your own options. There are still plenty of affordable homes out there but they won’t be in locations where everybody else wants to be.

    Lose the entitlement mentality and a world of options opens up.

  16. When I bought my first home in Ca in mid 80’s the formula/incentive for the banks were to resell the loan they sold to me to Fanny for Freddie which would replenish their loan capital so they can go sell more loans. The criteria required your monthly mortgage payment couldn’t be more than of a third of your monthly earnings. Otherwise, if the bank went thru with a loan outside this criterion they were going to carry the paper to term. It kinda worked. This limited the loans being made and limited the size of house you could get into especially as a first home.

    Then, the Clinton’s and Barney Frank went hog wild and rigged Fanny and Freddie into their own buy vote program. Then wall street bundled these high-risk loans into securities and credit default swaps and traded the paper. Then the bond rating firms gamed these high-risk securities by giving AAA ratings not knowing a damn thing what made them up. (The bond rating firms were the real criminals along with the Clintons and should have gone to prison, but I digress.) It was a house of cards. A small dip in the housing market caused loans to be under water and people home flipping couldn’t sell unless the lost money, people walked away from the homes and the securities went full default and the swaps couldn’t cover. Then some banks like Washington Mutual were stupid and came late to the party and tried to buy into the Keggar going on and got stuck with bad paper and went insolvent. Then Paulson scared the Chimp into a federal bailout of these high-risk speculators at the taxpayers expense. (Paulson was another criminal who should have gone to prison). Paulson took personal revenge against his former competitor Lehman Brothers to ensure they got no bailout and called in their securities so his friends at Goldman Sachs could buy it at bargain prices.

    This should have never happened and when it did the speculators should have taken the hit. The losses were not going to tank the county but the elites found out something else: Fear instilled in the public and crisis management gave them power.

    12 years later Covid.

  17. Yesterday, on a whim, I used StreetView to look up the location of a modest rental house in northwest Arkansas that a girlfriend and I occupied for a year while attending college. A whole row of these flimsy little 2-bedroom, 1-bath, linoleum-floored cottages, with one electric furnace in the living room to heat the whole house, had been built by a fundamentalist Baptist preacher who lived at the head of the road, across the street from his bluegrass gospel church. Probably he’d read one of the books in a highly popular genre at the time: protect yourself from inflation by pyramiding rental properties!

    Anyhow, I figured it probably had been a teardown in the booming Fayetteville-Springdale-Rogers-Bentonville metro sprawl, whose population octupled since our student days. But I was wrong: it’s still there, looking just the same, though the trees have grown up. Now it has a street number instead of just Route 5, Box 32.

    It’s nothing like this in, for instance, the Austin TX neighborhood of Rosedale. Most of it was built as modest, working-class housing in the 1930s and 1940s. Now, thanks to astronomical land prices, most of those little houses have been expanded and upgraded beyond recognition with all the luxe features, finishes and amenities to serve their well-heeled professional owners.

    What makes some towns boom like crazy, while others, once fashionable, turn into decaying wrecks? Having institutions such as colleges and medical centers as anchors helps. But those too get buffeted by the winds of time. Now some unlucky cities — e.g., Springfield, Ohio — are getting buffeted by waves of migrants too.

    In Arizona’s Verde Valley, you can visit Montezuma Castle, a cliff dwelling which the Sinagua people inhabited until just 600 years ago. Then they left. No one knows why, or what became of them. What will become of us? :-0

    • When I was little I seem to recall the tour of MC allowed you to climb up the ladders into the caves above Beaver Creek. Now, “You can gaze from afar, serf.” After paying 20 bucks to enter. I already paid taxes for this kind of thing. Seems like double dipping.

      I have an acquaintance who owns a nine acre piece of property along that creek, a few miles upstream of Montezuma Castle. His property stretches from the middle of the creek all the way up to the top of the mesa. It looks like nothing from the I-17, but about halfway up he has some nice little caves. Karst topography makes it simple to hide in plain sight.

    • >In Arizona’s Verde Valley, you can visit Montezuma Castle, a cliff dwelling which the Sinagua people inhabited until just 600 years ago. Then they left. No one knows why, or what became of them.

      When I was a boy, we used to visit Frijoles Canyon. Bandelier National Monument,
      https://www.nps.gov/band/index.htm
      named for Adolph Bandelier, a Swiss anthropologist. Same thing. The Anasazi, the “Ancient Ones,” left. No one knows what became of them.

  18. I’m a few years from 40…had I not lived in my parent’s place till 30 saving to buy finally in 2018, no way would I be able to afford my place. It was 225k then, now its 300ish 6 years later. Its gotten crazy, heck I cant even afford my vehicles with the mortgage payments if I had to buy them today. My former $2700 truck in good working order in 2009 is now over $10,000

  19. Origin of the oughts housing problem goes back well before Bush II.

    Slick Willies crew, and primarily HUD secretary Andrew Cuomo, was responsible for the housing bubble by pressuring the Federal Housing Authority and housing finance giants Fannie Mae and Freddie Mac to promote greater home ownership by reducing mortgage standards.

    Then of course he got a promotion to NY governor and nursing home murderer.

  20. Don’t forget that Commie Kamala wants to tax UNrealized capital gains. Would “increases” in home value be part of it? Considering they want to bankrupt us all, I wouldn’t doubt it for a second, so NOBODY escapes.

  22. Interest rates play a major role, as does Fannie Mae, in home prices. That’s because, like cars, houses are priced and sold on the idea of what you can afford to pay monthly, not how much they cost. When interest rates are low, house prices go up. Then the people offering mortgages became “brokers,” essentially just salespeople, acting on behalf of Fannie Mae and the secondary mortgage market. What we saw in 2008, with the collapse of the MBS market due to massive fraud, shook the investment world. Not because it destroyed wealth, but because they got caught.

    When I bought in 2012/13 Interest rates were bottomed out, and prices too. No one was buying. I was approved for a mortgage that would have run about $2000/month, something I wouldn’t tolerate. I shopped down-market and found a nice home that works for me at a bargain price. It had been for sale for about 3 years sitting empty. A few months after closing I got a letter from the mortgage company stating that my note was sold to Fannie Mae but they would continue to service the loan. In other words, they were just middle men.

    Oh what a tangled web!

    So when the 2008 crash happened, who was responsible? Turns out it was “Not Me!” that rascally ghost from The Family Circus. Everyone loved the big returns on the RETs, everyone loved cashing out equity on their homes to get those fun toys, everyone loved playing house flipper, and everyone loved getting big commissions on refinancing deals. So everyone and no one.

    It’s all fun and games til someone breaks the banking system…

  23. I think inflation has become worse since 2000 or so, fueled by government debt and money-printing to pay for it. In 2000, the national debt was $5 trillion. Today it is $35 trillion.

    In 2001 I bought my house for $77k. Today it is said to be worth $200k. Yes, wages have gone up, but not nearly as much as prices. I could not afford that today without seriously impoverishing myself.

    What I want to know is this — who in hell is buying all of these overpriced homes, especially the million-dollar-plus ones?

    Part of the answer is government bureaucrats making stupid money. My neighbors were public school teachers — they made $100k each. (It’s odd to listen to them bitch about how much stuff costs…) Let’s say you have a married couple of two cops or FBI agents making $130-150k each — that’s a $300k income.

    I think the other part of the answer is corporate types invested in companies making obscene profits in “Chyna” where the labor might be getting paid $1 or $2 an hour instead of $25 or $30.

    The rest of us, though, are pretty much fooked…

    • Addendum:

      Here’s some Chinese wage statistics. Chinese wages are rising, but still a fraction of what Americans make:

      “By 2011, the average Chinese worker commanded an annual wage of 41,799 yuan, the equivalent of $6,120.”

      “In 2021, the last full year for which Beijing’s National Bureau of Statistics offers data, the average Chinese worker earned 105,000 yuan a year, the equivalent of $16,153. The average American worker earned some $58,120…”

      Even at $58k you can’t afford houses at current prices without a dual income (so that’s minimum 80 hours of labor) and maybe not even then. $100-120k makes you working-class today. Families were buying homes in the 1960s and having 3-4 kids on ONE income…

      https://archive.is/H7wFE

    • Much of it is pre-approval and sitting down with your realtor to figure out the maximum monthly payment you can afford. Not what makes sense, only what you can afford. Then stretching out that payment for 30 years. That’s a pretty long time and assuming you get regular raises and promotions you’ll grow into the monthly payment.

      Unless you can’t get a decent 30 year note, then you start playing the 5 year ARM game. You get a great teaser interest-only loan for 5 years along with a delayed loan for your down payment. If you keep your payments going for 5 years the lender will refinance you into a 30 year mortgage and you’ll either pay your down payment loan off or roll it into the 30 year. Or extend another 5 year ARM. The bet is that if you continue getting 3% raises over that time you’ll be in a better position to pay a higher monthly payment.

      Because it’s important to get you into a home, not that you can afford it.

      • Buy low…sell high…if now is the top…don’t buy….a house purchase is highly leveraged…leverage works both ways….making payments on something that is dropping in value, by huge numbers, is a trap…underwater for a long time….then renting makes more sense and has advantages….

  24. On the topic of inflation in the fiat currency environment: every loan that is borrowed and paid off results in that principle getting destroyed (creatively), the only thing that remains is the interest that was paid (ideally). Assuming all the interest that was paid on that loan goes into a bucket along with all other duly paid loans (less, all other taxes, dividends paid etc) which then gets loaned, along with newly printed cash (rinse and repeat). All loans borrowed are paid, with interest. There has to be some cash which has to be left over, where does this bubble up to? Maybe someone smarter than me has the answer…

    • Like many similar conundrums, this is mostly because you didn’t use double-entry bookkeeping. Include the house as an asset (or liability, depending on whose perspective) and everything balances. There’s no money bubbling around anywhere. It’s accounted for to the penny.

  25. My parents bought a house in 1952 for about 3,500 dollars.

    The basement had dirt walls, a coal bin and an octopus coal-burning furnace, there was a floor drain.

    After several years, there was a cement block foundation and a concrete floor. One summer, the house was sitting on timbers so the cement block walls could be built.

    After a few years, the natural gas company piped in a natural gas pipe and the new furnace heated the modernized home.

    Coal delivered, the coal bin was full in October, a propane tank outside plumbed to the propane stove top and oven, you had heat during the winter months and cooking fuel.

    It was a simpler time to be alive, roast beef with a bone and gristle completed the roast beef dinner back then.

    My dad would go fishing and come back with a five gallon bucket full of perch. He would clean them all and freeze them.

    In 1960 I was nine years old, my mom and aunt went to an auction at a school house that was closed because of a lack of students.

    Lots of people were moving from farm to city way back then. Buy a house in town and move off the farm or move to California. Drive back and forth to the farm and have a house in town for greater convenience.

    Mechanization brings on many changes, no more milking cows by hand.

    It’s a big country.

    Back to the auction and the obvious reasons why, people move to where it’s easier to exist. Antarctica is not the place.

    During the auction, the auctioneer said, “I’ve never seen things go so cheap in all my life.”

    I’ve never seen things so expensive in all my life.

    I’ll have to cancel my six-month vacation to the French Riviera, it’s that bad.

    I’ve canceled all of them ever since I thought I wanted to go, can’t afford it then and can’t afford it now.

    Digging potatoes is a better thing to do. The row of carrots out there is killer this year.

    Doesn’t cost an arm and a leg to dig for stuff, you get some exercise.

    • Been digging the potatoes this season. Sweet potatoes, planted in 30 gallon grow bags. Bags were designed for a particular illegal (in some cases) operation. Grow bags work great, low carbon foot print and reusable. Able to move around when the tomatoes blot out the sun, just add more detritus as the season progresses. Two or three sweet potatoes in a grow bag turns into 30-40 in four to five months. Thats a 1500-2000% gain. safer than playing around with fiat, or investing in real estate. Its something you can do on the patio of an apartment. Even makes a good hiding place for your cat, and you cant beat that with a bat.

      • “Two or three sweet potatoes in a grow bag turns into 30-40 in four to five months.”

        What is this black magic, Norman?

        This sounds like a profound method of food security. I will have to investigate and attempt this at the next available opportunity.

        • Black magic indeed BaDnOn. Sweet smelling rich black soil is almost equal to black gold. I remember my grandfather pulling the magic trick on me, just as I have on my grandkids. Parting some leaves, sticking ones hand deep into the soil, saying some magic words, then pulling out a handful of food never gets old.

          Permanent raised beds win hands down. Where I think you live, you should be able to find old horse troughs on CL for cheap. The older and cheaper the better. Get as many as you can. They can also be arranged as a vehicle barrier. Bottom rusted out? Those are best.Lay down some metal lathe, fill with homemade black gold and you have a lifetime of prairie dog/gopher free gardening

          Grow bags offer some unique advantages. In a greenhouse they are tops and can be re-jiggered based on seasonal demands. Get the best quality beige ones. Most black ones are substandard and fail within a season or two. Good beige ones can last 4-5 years when cleaned up and stored properly. The roots prefer the cooler temperature the beige ones provide. Use amazon reviews to determine the best ones and expect to pay a fraction more. Seriously worth it though

  26. My Dad recently told me about a movie, Barn Red, that covers this very topic. It was made in 2004 and deals with property values and usage. It’s very realistic in revealing subtly that you don’t own your land but, you can deny your neighbor the usage of his.

    If you want to seethe a bit, you can watch it free on Tubi
    https://tubitv.com/movies/447774/barn-red

    • I just watched a bit of that from your link, and if you like that, may I humbly suggest “Stranger on My Land” starring Tommy Lee Jones.
      In this story it isn’t a developer, but the almighty federal government, which seeks to push him off.

  27. That was all quite sad.

    Perhaps I have a little good news. I calculate that in a year or so, I will have a 3-car garage, my lab, a small house, my backhoe, a stand alone office, a few sheds, and my 10+ acres, all on off-grid power, for about $100,000.

    But it does cost a great deal in the way of labor and grit. Luckily we’re chock full of that. 😉

    • Good morning, BaDnOn!

      Indeed. But -as you note – there are ways around it. One of the worst impediments blocking young, first-time buyers is zoning. Where I used to live, it was not legally permissible to build a tiny home (let alone park an RV) on a small plot or subdivide a half acre, say, and have 2-3 tiny homes or a few RVs parked there.

      My hope is that enough young people come to understand who their real enemy is.

      • I hope that, too Eric.

        Luckily, out here, there are effectively no “rules” yet, and I hope there never will be.

        People might be surprised by how far their own hard work and ingenuity can take them, should they not be stifled by busybodies and vampires.

      • I’ve been noticing stories about zoning problems. But they’re being presented as a need for more (implied federal) government intervention, not elimination. Because the NIMBYs are the problem, not the bubbles!

      • “My hope is that enough young people come to understand who their real enemy is.”

        The eternal problem… these same young people will come to understand that joining the enemy comes with great benefits.

        • Beware friend. Some of us have walked the trail you’re on. Just know that it can all be stolen at any time for no reason whatsoever.

          The freedom we have left is what is seized or stolen when the huge predators are distracted. Were small furry critters in a world of T Rex and velociraptors.

          • I’m quite wary, Ernie, and unfortunately, know you to be right.

            “Were small furry critters in a world of T Rex and velociraptors.”

            Then perhaps, what we need is an asteroid. 😉

    • >I calculate that in a year or so, I will have a 3-car garage, my lab, a small house, my backhoe, a stand alone office, a few sheds, and my 10+ acres, all on off-grid power, for about $100,000.

      Now *THAT* is impressive!
      Congratulations to you, BaDnOn. 🙂

      Just out of curiosity, what are your plans once construction is complete?
      Presumably, such plans heavily involve your own laboratory.
      “Decline to state” is a perfectly acceptable response, IMO.
      Salud. 🙂

      • It’s true, Adi!

        I will actually involve myself in some legitimate activity. I won’t be too specific at this time, but I have some simple automotive testing products in mind, as well as some production analysis ideas. Later, hopefully, I plan to design some instruments for sale. I will also be investigating “carbon-neutral” fuel production from biomass. I still believe it can be done and be competitive with traditional fuels IF done correctly.

        So many wonderful ideas, but there was always someone standing in the way or happy to reap all of the rewards. No more.

        Also I will get more heavily into farming and ranching on a small scale. It should cover all we’ll ever need as well as maybe some farmer’s market goods.

        And as for the cost of things, I’m a bit surprised myself! But the truth appears to be, if you do much of the work yourself and are deliberate and resourceful about things, buildings and infrastructure really STILL aren’t all that expensive, even though the cost of materials is a bit insane these days.

        It’s about all the vampires, the financiers, and those who take advantage of people’s need of expedience and their tendency towards convenience. It’s no wonder, as Eric said, that they “zone” things so you can’t park an RV on your lot and slowly build your house.

        • BaDnOn,
          You are actually doing what I have always only dreamed of.
          Kudos 2U.
          We have had this discussion before, IIRC….
          I have always had a great fascination with the late 19th/early 20th century era, because it bore magnificent fruit in terms of great theoretical understanding (e.g. Maxwell) while annoying questions lurked just beneath the surface (e.g. ultraviolet catastrophe, too hot Earth, etc.).

          The Age of Steam must have been an exciting time to be alive. JMO. But, people did not know what they did not know. The “unknown unknowns,” as Donald Rumsfeld liked to put it.

          I also am kept busy by construction work, at the moment (significant remodel of my residence of more than 40 years). But, sooner or later, the construction work will be complete, and I will be looking for something to do. Polysaccharides sound interesting. 🙂 We’ll see…

          • I believe I know what you mean about perhaps belonging in that Age of Discovery.

            Maxwell was undoubtedly a badass. One of the most brilliant men in history. I’m also a huge fan of Michael Faraday. But yes, specters such as the UV Catastrophe and the Luminiferous Ether needed slain by the gods of quantum mechanics.

            “Polysaccharides sound interesting.”

            Eat an apple? Or many other foods, for that matter. Or perhaps you’ll be experimenting with the ultimate polysaccharide, cellulose.
            Biochemistry is indeed endlessly fascinating.

            Back to the 19th Century: I’ve been occupying my wandering mind at times with thoughts of what might have happened if Diesel’s engine would’ve been invented 40 years before it had. What if the South had become mechanized, and they had rid themselves of slavery before the “Civil War”. They could’ve grown their own fuel, and had a stranglehold on that production that would’ve put them into a powerful position. …And perhaps they could’ve even discovered Texas’ oil early. What THEN? 😮

        • >they “zone” things so you can’t park an RV on your lot and slowly build your house.
          When I was a small boy, we lived in the garage my Dad had built as a first step, before he built the house. CMU walls, coal stove for heat. Water from the well my Dad dug. We did OK. There were no RVs in those days. Anyhow, the garage was a better idea…

          • Adi,

            The garage IS a better idea. I’m still living in an RV for the time being, but I wish I would’ve built a little structure instead. RVs really are meant for travelling and are absolutely perforated with rodent access and also poorly insulated.

            That said, I lived for 7 years in an RV that I bought for $2,500 and an RV can make quick work of shelter requirements if necessary, and if maintained, can be sold to get your money back.

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