What was the average cost to buy a house or car in the 80s and 90s?

[pshufd]

I agree, Now allow me say I live in one of them most expensive markets in the country, but 20-something year olds are dealing with lower wages, higher debt and cost increases in the housing market that outpaced inflation. I have a friend who works a decent job at a hospital, doesn't go out to eat much, but could not afford even renting an apartment herself. Like so many people she needed to find an apartment with roommates.


So true, but prior generations have not had to deal factors that these kids have been dealing with. I was able to work two jobs, go to school at night and afford an apartment. Now people are working two jobs and many still can't even afford rent.


I think that's an unfair generalization where so many people starting off in their careers have the deck stacked up against them and accuse them of being the problem is short sited and just plain wrong. Back when I started my career, getting double digit percentages in raises was not unheard, I easily got 10%+ raises and promotions came with real raises.

With that said, lets put some hard numbers to your generalizations.

The average salary for college graduates is 43k (zip recruiter) or 21 dollars an hour. We also have to remember these 20 somethings also have student loans and the average student loan payment is 300 a month.
View attachment 2249020

The median house price for Massachusetts is 600,000, and lets say they were able to somehow come up with a 20% down payment ($120,000). That means they have a mortgage of 480,000 or a monthly payment of 3,500 dollars, I pay 900 dollars a month in escrow , I'm not sure if that's normal or not, but for me that includes real estate and insurance. So now our pretend mortgage is at 4,400 dollars a month

Last time I check 4,400 is larger then 3,000 and that's not including student loans, utilities, food, car payments, car loans, etc.

So please tell me how much scrimping does 20 somethings need to do to be able to afford a 4,400 dollar mortgage payment on a monthly salary of 3,000?


Yes, but do you know the average rent prices in Boston is 2,800 dollars and as mentioned above the average student loan is 300 dollars a month. Fresh graduates cannot even afford a single bedroom apartment.

Massachusetts has plans in place for adding tens of thousands, if not hundreds of thousands of affordable housing units because of State requirements on zoning changes for 177 cities and towns. We have a place in Newton and Newton is looking at adding 8,000 affordable units because of state requirements so I keep an eye on it. Last night, a Reddit poster pointed me to the plans for Belmont and Somerville. And I did know that Lexington has some plans. I do not know if these are rentals or condos but it will probably be a combination of both. There could be a massive amount of construction in Massachusetts because of this over the next 5-10 years.

I was just checking the village where our place is and there are 13 homes for sale from $1 to $4.5. $1 million gets you a 930 sq ft condo. $1.5 million gets you a 1,260 sq ft condo. $1.8 million gets you a 1,600 sq ft condo. But the schools are great. There are lot of more expensive cities and towns too. Most of the neighbors are retired so they bought decades ago. There's a young couple with a child across the street. She spends a lot of time working on her lawn and garden with her child. One other neighbor has is a dual-doctor family with 3 kids. I generally don't see anyone around during the day so I assume that they're both working and that the kids are in school. I run around the village when I'm down there and I do see young families and they must be doing really well, either from their jobs or have family money, to be able to afford to live here. I don't see how you could move to a place like this if you're a normal young adult. I think that a ton of new construction for smaller, more affordable places will change that.

I have been in many heated discussions on r/Massachusetts with younger folks that are incredibly angry about the situation and they often call for zoning changes. What is surprising is that the vast majority are unaware that the State has required zoning changes and that there are plans in about half the state to add huge amounts of affordable housing. The Legislature should have thrown in a few bucks for marketing.

Most people I know do not pay attention to local Town Planning Board meetings. They are available on YouTube for my town and I like to at least read the announcements to see what's going in locally. They provide a map of the items to be discussed. I've gone up before the board a couple of times to deal with abutter issues.

 

[senseless]

You have to factor in interest rates, because monthly payments determine affordability. Rates in the 80s were brutal.

 

[Apple fanboy]

Something else that will be an issue for my generation and younger is pensions.
Many people of my parents generation were on really good company pensions were they get a final salary pension.
Because we won’t get that we have to save harder for retirement. As many can’t afford to save what they need, they release equity in their property. So when they do pass on, they pass on a lot less of an inheritance.
Many young peoples only hope of home ownership lies with inheritance for the deposit.
My plan is to have the mortgage finished (again!) by the time my parents die. Then I can blow it all on Apple computers (not!).

 

[maflynn]

Something else that will be an issue for my generation and younger is pensions.

For many Americans, it was the prior generation that had really good pensions, and my generation - not so much. Many US companies that offered pensions started converting them over to 401ks in the 1980s and 90s. I have a friend who's resume is such that he really has a meager retirement and like me, he's on the wrong side of 55. Its not like he can start dumping copious amounts of money into his retirement either, the cost of living is such that like him, many Americans are living paycheck to paycheck. Its not about going out to eat and having avocado toast, but making ends meet with the basic necessities of life

 

[pshufd]

Something else that will be an issue for my generation and younger is pensions.
Many people of my parents generation were on really good company pensions were they get a final salary pension.
Because we won’t get that we have to save harder for retirement. As many can’t afford to save what they need, they release equity in their property. So when they do pass on, they pass on a lot less of an inheritance.
Many young peoples only hope of home ownership lies with inheritance for the deposit.
My plan is to have the mortgage finished (again!) by the time my parents die. Then I can blow it all on Apple computers (not!).

A pension is great if you live for a long time. I had a pension and I received regular offers to cash it out which I ignored. Then I got cancer in my 50s and not living to 65 would mean that it was worthless to my heirs. So I cashed it out.

Our son has a pension at his workplace in addition to a 403b which he maxes out and he contributes to Social Security. One of the big things about pensions is that there's no COLA. This affected my mother quite a bit. She had a $20K pension, Social Security + investments. Social Security has COLAs. Her investments provided growth to keep up with inflation.

Hospitals, universities, public schools, municipal, state and federal jobs have historically provided pensions. Automakers used to as well - I don't know whether or not they still do.

 

[dukebound85]

So I recall having similar conversations as above with colleagues.
The issue is when I bought my first home, I could get a 95% or 100% mortgage. These days you need a 10% deposit at least.
But here in the UK house prices have risen much faster than wages. Saving a 10% deposit is tough for youngsters today. But then again I worked 7 days a week all the hours I could to save ours.

you can still get conventional loans for 3-5% down here in US

 

[pshufd]

you can still get conventional loans for 3-5% down here in US

You have to pay for Private Mortgage Insurance so it's an additional fee. You can remove it when your equity gets to 20% though.

 

[maflynn]

A pension is great if you live for a long time. I had a pension and I received regular offers to cash it out which I ignored. Then I got cancer in my 50s and not living to 65 would mean that it was worthless to my heirs. So I cashed it out.

The thing about pensions is that it does not cost the employee money, they don't have to contribute their money to get it. With 401ks and 403b, its up to you to take a portion of your own salary and invest towards your retirement. Many but not all employers will then match your contribution typically up to 5%.

Basically you're reducing your weekly/biweekly/monthly paycheck to fund your future retirement. Also regarding pensions - you can specify beneficiaries, so the company doesn't get to keep the money, it goes to whom you specify.

 

[pshufd]

For many Americans, it was the prior generation that had really good pensions, and my generation - not so much. Many US companies that offered pensions started converting them over to 401ks in the 1980s and 90s. I have a friend who's resume is such that he really has a meager retirement and like me, he's on the wrong side of 55. Its not like he can start dumping copious amounts of money into his retirement either, the cost of living is such that like him, many Americans are living paycheck to paycheck. Its not about going out to eat and having avocado toast, but making ends meet with the basic necessities of life

Companies sometimes played games with pensions as well sometimes raiding them. I do not recall the exact mechanism for this but I do recall it decades ago. Companies can also underfund pensions and, in a bankrupcty, the pensions go into the Pension Benefit Guarantee Corporation where people can take large haircuts on their expected payouts. I recall that this happened to at least one of the Airlines that went bankrupt.

 

[maflynn]

Companies sometimes played games

Some had played games to be sure and most if not all got caught. I don't believe its something that is occurring now given the increased regulations and oversight. If you're not comfortable with a pension plan, you can stay in it, but then also contribute to a 401k or a Roth IRA. You get the best of both worlds.

All things equal, I would much rather have a company dedicate a percentage of my salary towards a pension that does not come out of my salary. I work for an organization that is providing 9% of my salary with with a guaranteed 5% growth.

 

[pshufd]

The thing about pensions is that it does not cost the employee money, they don't have to contribute their money to get it. With 401ks and 403b, its up to you to take a portion of your own salary and invest towards your retirement. Many but not all employers will then match your contribution typically up to 5%.

Basically you're reducing your weekly/biweekly/monthly paycheck to fund your future retirement. Also regarding pensions - you can specify beneficiaries, so the company doesn't get to keep the money, it goes to whom you specify.
View attachment 2249086

I had a look around on what happens if you die before collecting and it looks like it depends on the particular plan. Some have 50% benefits for spouses if you die after you start collecting. If you have no spouse, then $5,000, presumably for burial costs.

Benefits are fungible. If you're getting a pension, then the company or organization is taking it out of some other form of compensation.

 

[maflynn]

Benefits are fungible. If you're getting a pension, then the company or organization is taking it out of some other form of compensation.

A pension is part of the salary/benefits package to be sure. Yet with that said, I think its safe to say organizations that don't have pensions are not paying more in salaries then those that do. Companies are taking that money they dedicate to pensions and are using it for non-employee initiatives. The progression of marginalizing and minimizing employee's benefits has been going on for decades. Companies who kill off pensions do not provide increased benefits. I know because I've worked for one such company. They killed the pension and we didn't see any other benefits in its place - sure we got matching, up to 5 percent of our contributions to a 401k, but that's a far cry of what the pension was accruing

 

[pshufd]

Some had played games to be sure and most if not all got caught. I don't believe its something that is occurring now given the increased regulations and oversight. If you're not comfortable with a pension plan, you can stay in it, but then also contribute to a 401k or a Roth IRA. You get the best of both worlds.

All things equal, I would much rather have a company dedicate a percentage of my salary towards a pension that does not come out of my salary. I work for an organization that is providing 9% of my salary with with a guaranteed 5% growth.

The PBGC has 1 million people collecting and 33 million people insured. So pension funds go bankrupt. A lot. The case I remember is where the limit on PBGC payouts was $27K/year. The airline pilots that got dumped into it had typical expected payouts of $80K/year. A bunch of multi-employer pension plans were dumped into the PBGC during the pandemic as a lot of people with pensions would have otherwise wound up with nothing. This was debated in Congress for many years and it was kind of hidden in pandemic spending - to provide a partial bailout into the PBGC. The PBGC wouldn't have been able to abosrb those without help from Congress.

Our son's employer's pension was funded around 72% back in the 2010s and they fully funded it in the late 2010s though earnings took a hit. Not all employers fully fund their pensions. The overall state funding percentages are around 78% though some are much lower than that. It's a gross case of kicking the can down the road.

 

[pshufd]

A pension is part of the salary/benefits package to be sure. Yet with that said, I think its safe to say organizations that don't have pensions are not paying more in salaries then those that do. Companies are taking that money they dedicate to pensions and are using it for non-employee initiatives. The progression of marginalizing and minimizing employee's benefits has been going on for decades. Companies who kill off pensions do not provide increased benefits. I know because I've worked for one such company. They killed the pension and we didn't see any other benefits in its place - sure we got matching, up to 5 percent of our contributions to a 401k, but that's a far cry of what the pension was accruing

We're in a time where employees have pricing power so I see things improving in wages and benefits. Of course the ability to shift work overseas in the 1980s, 1990s, and 2000s were harsh on employees. My son who works in Boston told me that everyone in his group got a promotion and a 20% raise. I imagine that's to offset rising housing prices.

I look at job listings in MA and NH and there are many in the Boston area where salaries are 50% higher than in NH. They typically require you to work in the office and also to have housing with a reasonable commute.

We have lots of school districts in NH that are short on teachers and other staff. So employees have to do additional duties. When voters don't approve higher budgets for staff, the schools have to cut back on services. One friend told me of a case where the district recently told parents that they will have to transport their kids to and from schools as they weren't able to hire bus drivers from the budget. I'm sure that parents will love that.

We got stock options, bonuses and employee stock programs where I worked. The stock rose 29,000 percent from when I was hired. And I did have a ton of company stock in my 401k program. So I hit the jackpot in working for a listed company.

 

[dukebound85]

You have to pay for Private Mortgage Insurance so it's an additional fee. You can remove it when your equity gets to 20% though.

that has always been the case. Doesn't negate the fact you can get a mortgage with less than 10% down as was implied in the poster I was respond to

 

[Bubble99]

Then and Now: What Things Cost in the 1980s vs. Today

With the rising cost of inflation, it's no secret some items were cheaper in the 1980s. Here are 13 items whose price has changed since that decade.

www.aarp.org

Along with cheaper everything, pay was generally much less too... so it's relative.

We might get to a point in the not too distant future where entry level pay is $100K/yr but then a loaf of bread is $30... or maybe that warps such that entry level erodes to $10K/yr and a loaf of bread inflates to $50.

If you want to make it more interesting, try just 100 years ago... your grandparents prime. Hint: nice cars < $1K and a very nice home < $10K. But again, it's relative. Average U.S. income in 1920 was a whopping $3,269.40 per year... or $272/month (whewwwwwww! Don't spend it all in one place).

The big lesson in this observation is that you could buy a good home for about 2X average annual salary and a good car for about 1/3rd average annual salary. How do those ratios compare to now?

Wow in 1920 your grandparents $10K for home and 1K for a car that is cheap.

The inflation has gone up lot sense the 1920.

 

[pshufd]

Wow in 1920 your grandparents $10K for home and 1K for a car that is cheap.

The inflation has gone up lot sense the 1920.

You're not comparing like items. That car in 1920 couldn't go 45 miles on a gallon of gasoline. Nor did it have the safety devices, communications, and the ability to go 130 MPH.

We're upgrading a 100 year old home to modern code and it looks like it's going to cost about $300,000.

 

[HobeSoundDarryl]

Here's the compounding graph...

But I'd love 624% sure thing compounding on savings over 100 years, so please open a bank.

However, in your defense of "math", here's an actual inflation calculation based upon real inflation rates over the 100 years...

Why so different? Because the FED doesn't keep inflation at 2%. There are many times when it overshoots or far overshoots 2% (like last few years). There is no goal to manage it back down to an overall 2% level- it just attempts to get back to "normal" from spiked highs. For example, following periods of high inflation, the FED doesn't try to trigger significant DEflation to get the overall average to 2%/yr. After some years of >2% inflation, the FED is only trying to work it back to 2%.

Notice that most of the inflation pain really shows itself since about 1971 or so. A big change was made in 1971 that fundamentally devalued U.S. currency. But even with that, I suspect the bulk of "why?" is mostly married to consumers deciding to just pay more vs. fight for their end of the capitalism "bargain" in transactions.

 

[pshufd]

Here's the compounding graph...

View attachment 2249213​

But I'd love 624% compounding on savings over 100 years, so please open a bank.

The calculation is FV = PV * (1+interest rate) ^ number of years. You can do a lot better with current rates though. Ratio is FV / PV. Growth is (FV - PV)/PV.

 

[KaiFiMacFan]

I live in an area where, if new housing is constructed, you can bet there will be a big sign labeled "LUXURY" somewhere, and the units cost $2500-$4000 a month. And if there are any affordable units, they're either limited to people who have very little income (those who are caught in the middle are disqualified) or people with children, and there will be a waitlist in the hundreds...

Building new housing is important, but it can't all be luxury apartments and condos. That doesn't benefit most of us. I'm only able to live here because I have roommates and our place is old. But I certainly don't want to be renting all my life. I think I have time to change things; I'm only 22 and I don't foresee myself living in NYC forever either. Living in an extremely expensive area, even if you're making it work, starts to wear on you after a while. The out-of-control prices of groceries alone is enough to make me want to leave this area for good.

 

[HobeSoundDarryl]

The calculation is FV = PV * (1+interest rate) ^ number of years. You can do a lot better with current rates though. Ratio is FV / PV. Growth is (FV - PV)/PV.


View attachment 2249229

I'd love any of those CD rates vs. the FED inflation target of 2% for 100 years.

 

[pshufd]

I'd love any of those CD rates vs. the FED inflation target of 2% for 100 years.

You can get them right now. Just not for 100 years.

 

[HobeSoundDarryl]

Back to OPs apparent point, perhaps further clarified by the reaction in post #66, it's only "Wow cheap!" relative to income and pricing now. Again, the grandfather who could buy that good home in 1920 was probably paid about the average annual salary of only about $3,200 per year. 2020 people had median income of about $56K. So Grandfather from 1920 would think Grandson is freaking rich based on a peek at 2020 average income only... UNTIL he got to see what common things cost in 2020.

20 & 30-somethings now will likely see the same effect when they become the Grandfather. Grandchildren out in 2063+ might be awed that it was possible for an individual to actually own a home back in 2023 and that they many could be purchased for well under a million dollars... or perhaps two million dollars. And next-gen Grandfathers will talk about "the good old days" when it was possible to buy 2023 homes for so "cheap", etc.

If someone could take their 2020 income back to 1920 to buy a home, it would only cost about 1/5th of annual salary. If someone today has a little savings discipline, they could probably pay cash for home out of a portion of one-years pay.

However, it is not close to the same ratio if your 1920 grandfather could bring his annual salary to 2020 to buy a home. While about 3 years of salary could fully cover a good 1920 home, 3 times $56K in 2020 will likely struggle to buy an equivalently good home. Median home price in the U.S. in 2020 was $322K. 3 times Grandfathers pay applied in 2020 might not even quality for enough downpayment. Could Grandfather even rent a home for more than a few months for 100% of his gross 1920 pay in 2020? No.

Inflation gets the blame for that gigantic difference. However, the great widening seems well beyond an explanation of a simple concept like inflation. I suspect the 1920 home sale had the vast amount of the money buying the home itself (the materials of the home). The 2020 home has a gigantically fat margin on it... which can be spun as tied to the word inflation but is- IMO- heavily influenced by a few generations of people just opting to "stretch" to pay more and more and more so that all of the parts & pieces that go into the home could "inflate" profits and the builder could also inflate their big cut too. I don't foresee anything changing that going forwards unless consumers decide to value the money like they wish it should be valued... which manifests by opting to NOT pay any ever-increasing price asked for everything.

 

[compwiz1202]

Companies sometimes played games with pensions as well sometimes raiding them. I do not recall the exact mechanism for this but I do recall it decades ago. Companies can also underfund pensions and, in a bankrupcty, the pensions go into the Pension Benefit Guarantee Corporation where people can take large haircuts on their expected payouts. I recall that this happened to at least one of the Airlines that went bankrupt.

Exactly what happend to my dad. They halved it just as he was retiring. The only good twist was it wasn't like his brother who had it happen years after they retired and had their budget built around the pension income

 

[compwiz1202]

Part of this is global competition and a much larger workforce. Bigger workforce means more corporate leverage. One of the huge technical innovations of the 1980s was the standardized container. Another big difference was telecommunications allowing movement of knowledge work overseas.

That was one of the huge detriments of telecommunications advance for workers. Everyting went to crap when outsourcing started