In 1950 the average house cost $7,400.00 roughly. The federal minimum wage in 1950 was $0.75 per hour. Interest rates in 1950 were about 4.5%, so your monthly payment would be about $37.49. If you do the math ((((37.49*3)*12)/52)/40=0.648865…. 3 is 3 times the income needed, 12 is the months, 52 is weeks in a year, 40 is hours in a week worked. that is todays standard. 1950 predated modern labor laws so 48 hours and 6-day work weeks were common. There for you only needed $0.65 per hour to afford the average house and Federal Minimum Wage in 1950 was $0.75 per hour. You could afford the average house on minimum wage, may be not easily but doable. Today the average house is $408,800.00, interest rates are 6.25%-ish. Now with everything you need to buy that house your monthly payment is $3,149.00 roughly. Do the same math as before ((((3149*3*12)/52)/40=54.501923…. $54.51 per hour needed to afford a average house today. Federal Minimum Wage is $7.25 per hour and the average wage in the United States is about $32.07 per hour. I do not make even $32.07 and in my view, I believe I make a decent wage at $24 per hour let alone $54.51. The 50th percentile for what I do is $30 per hour. Evan the average 1-bedroom apartment in the United States runs about $1,630 a month and that you need $28.22 per hour to afford.
To me it looks like the bootstraps have been cut off and the ladder was pulled up above my reach to jump or stack to climb to. Am I regulated to eventually go homeless no matter what I do, because that seems to be where I am headed. Going back to school is too expensive I already have student loans. Not that it would help any way look at the latest reports for graduates from colleges across the county for job placements. Wages are not going to change much from what they are. From what I can find the late 1970's is when single income home ownership started its shift to where we are at today. I believe that Middle-class stability requires single-income sustainability for families, that families thrive when one parent can focus exclusively on the household, regardless of who it is. I know this for a fact as I had the benefit of both parents being home full time as they were retired. That is how I was raised and I am in my late 30s. we then nor now are rich by any means, but we made things work. The life plan that was taught to me from k-12 does not and has not worked. I know I am not the only one that feels this way and others are in much worse situations than I am. I have deviated from my original topic so I will end this here.
The math for the average house cost vs average income does not math
byu/thesleepingone162 inpersonalfinance
Posted by thesleepingone162
21 Comments
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That’s correct. Home ownership is more out of reach for most people than it ever has been in our history, and house prices have vastly outpaced wage growth for the better part of 30 years. Most people in America now will never own a home.
It’s very simple. Median income people are not buying houses.
The average house in 1950 was 1/3 the size with 1 bathroom and a 1 car garage
And that’s why birth rates are declining. The cost of living is high, and more people are sharing apartments or staying with their parents.
economy is simply not what it used to be. post war period had insane levels of growth. now, our economy is more ‘normal,’ even though its still vastly larger and more robust than most of the rest of the world.
Why are you talking so much about the averages? What is the cost of a home or apartment *where you live*? Real estate is hyper local that the averages tend to miss.
Yes looking at the averages or medians the picture isn’t rosy at all. But you should focus on the areas near you to get the most accurate picture.
Unfortunately yes this economic situation tends to leave people behind and it’s headed in a worse direction. All we can do individually from a PF standpoint is cut spending, grow income, or both. Roomates, second jobs, overtime, etc. Multi-generational housing will likely become more in vogue if things don’t improve, especially so if they get worse.
my wife and I got pretty much the best start in life one could hope for in the middle/upper middle class and even then it took years of extremely careful saving, lucky breaks, and sacrifices to close on a home in SoCal. It seems essentially impossible to attain home ownership as a young person if you don’t have the right mix of high income good fortune, and negligible debt
Did people making minimum wage buy houses? And were they the same size as starter homes now? If were gonna do the math, do all of it. Make sure every variable is covered. Otherwise youre just cherrypicking data.
I mean any reasons why homes were so cheap? Was there a mass loss of lives 5-10 years prior that would explain more homes being on the market? Government programs perhaps? Like maybe the GI bill that covered millions of people with low cost loans, interest etc? Schooling, trades etc? 1950 isn’t the year you want to use for a reasonable complaint. Although its great for a bitchfest, without context….
Did they have 30 year mortgages back in the 1950’s? But yes homes were more affordable
1950 was also a wage spike due to the effects on the workforce and spending related to the Korean War.
It was also between the recession that ended in 1949 and another that began in 1953.
Things were also much, much more unstable. Unions were not strong because things were going well, they were strong because workers lacked sense of security and layoffs were frequent.
Using Detroit for example: people believed that they could just move there and get jobs that doesn’t exist that was such a burden to the city that the city was paying for adds in newspapers throughout the country saying not to come without a job because they wouldn’t get one.
A lot of those homes were also bought using Veterans Benefits. Which have actually expanded and are more beneficial today. But people don’t want to serve
A couple things:
First, most homes that are currently owned weren’t purchased very recently. A massive stock were bought or refinanced during COVID, when 2.5% interest rates made your math look much different.
Second, most families aren’t single income. A 54 dollar an hour job is well above median, but a household with two people making something in the 30-40 per hour range is common.
People are still buying houses. Lots of them. The prices are slowly cooling, the listings are sitting for longer, but the simple fact is that plenty of folks have the money to buy.
Real estate has 3 rules: location, location, location.
House prices and income opportunities in Oklahoma City have nothing to do with San Francisco. The ‘average’ house being $408k is utterly useless information. It is literally impossible to make only the federal minimum wage in California.
Is OP like uhhh mentally challenged or something? What is this incoherent rant all about?
Look at some actual data. It’s easily available online. It tells the real story, not a tortured, inaccurate narrative based on conjecture. The current rate of home ownership, about **65%,** was achieved in 1979 and has not varied. There’s no reason to make stuff up when the data are available to anyone with a computer and internet connection.
[https://fred.stlouisfed.org/series/RHORUSQ156N](https://fred.stlouisfed.org/series/RHORUSQ156N)
“During the ‘4O’s a number of factors — including the shortage of available rental units, and an unusual degree of prosperity — combined to **raise the proportion of owner-occupied units to 53 percent in 1950, the highest in our history.**” (emphasis added)
Size of Dwelling Units. Four-room and five-room dwellings accounted for 44 percent of all nonfarm dwellings in 1950. The median size was 4.6 rooms, about the same as in 1940.
The proportion of occupied nonfarm dwelling units with a private indoor flush toilet increased from 73 percent in 1940 to 80 percent in 1950. The proportion of occupied nonfarm dwelling units with a private bath or shower increased from 68 to 77 percent.”
So despite wages, etc. only about half owned their homes, considerably less than today. And 20% of homes did not even have indoor plumbing in 1950! There is a discussion of the difference between white and non-white residents and you can guess what it looks like.
You may read the document yourself:
[https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Situation-1951.pdf](https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Situation-1951.pdf)
Look up NACA loans, they specifically try to address this issue
That’s still very modest home cost. Something I think should be factored in is the size of home. In the 1950 the average home had 3 bedrooms a dinning room and decent size kitchen. Now that 400k house only has 2 bedrooms and a okay kitchen.
Using average housing prices and minimum wage makes no sense. Only a percent or so of people get paid the federal minimum wage.
I’ve NEVER thought that average earners can afford an average home. Because we start small or in a less desirable area and then gradually over time , upgrade to THEN buy an average home .
If you follow what everyone else does, you will end up like the majority… poor or middle class. Going to school, then go to college, get a job, get married, buy a house, have a kid/s… it works for some, but most just end up in debt and struggling. Have to teach your kids a different path or they will just end up in the same cycle that’s rigged against them.
The main reason is a deficit in housing supply. Since 2008 we’ve been in this deficit.
Another factor is that in the 1950’s they were primarily building starter homes. Like <1000 sq ft for a family of 3-4. Now that land and supplies for building costs more the new builds have to be a lot larger than that in order to be profitable (~2,400 sq ft).
And more technology in homes today make them a bit more expensive.
Compare homes then to homes now. We have 5000 square foot monster homes with multiple living rooms, bedrooms for each kid, bathrooms for each bedroom, etc. Not a two-bedroom rambler with one small, shared bathroom and one living room and simple kitchen.