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Something that a lot of people get wrong in these calculations.
Life is more expensive these days, and I don’t mean cause the prices are higher.
In the 70s, you didn’t need higher education to do well, now you do.
Not everyone had or needed a TV, now having a phone and internet is kind of critical for day to day life.
Things were closer, it was easier to not own a car.
Getting a job was simpler, you could just walk down a street and try different businesses, now you got many rounds of interviews.
I could keep going, but overall, things just take a lot more effort while people having less and less free time.
There are more people to compete with in these areas.
Yeah in the 50s and 60s the US was still riding the post WWII high. Now a lot of the world has (re)industrialized and so we’re all competing against each other.
That’s pretty crazy. I have almost $90 an hour and I can’t afford to buy a house either right now.
Edit: although I only about $26/h as my actual salary so that might be why.
I have been living in Philly for a decade now, and in that time, I am not sure I have seen a single new house go up for less than $500k. Everything in the $50k-$300k range has been either an ugly condo or old track housing from the post-WW2 period.
Yeah man it’s rough in the city. I also really don’t want to live far away, so… 🥲
Bullshit you can’t. The GF and I make a mere $42/hr combined before tax and we are homeowners.
How are you fucking up so badly, that you can’t save up enough for a down payment on a $300-400k home at $90/hr? I make less than a quarter of what you make. Where is all that money going?
It’s possible that they live somewhere very expensive where 300-400k homes don’t exist
I corrected my salary. I am a consultant and I get around $89/h, but I take out about $26/h as my actual salary and save the rest for when and if I’m out of work for a time. So there you have it.
I also live in the city where houses are like 500-800k. 👍
The answer to your statement likely requires knowing where OP lives. There are many locations in the US where 400k houses do not exist.
Jesus Christ. I guess you know everything about their finances to just throw that shut at them huh.
Well, let’s do the math on that, arbitrarily picking 1974, because that’s the year my wife was born:
The median home price was $35,900 in 1974:
https://www.huduser.gov/periodicals/ushmc/winter2001/histdat08.htm
The federal minimum wage was $2.00 an hour.
https://www.dol.gov/agencies/whd/minimum-wage/history
A 10% down on $35,900 was $3,590 or 1,975 hours of minimum wage work. At 40 hours a week, that means 49.375 weeks of work saving every penny. Not a reasonable action since you still have to, you know, LIVE and stuff. But that gives us something to compare with today. The full house would be 17,950 hours of minimum wage work or 448.75 weeks, 8.63 years.
Today, the median home price is $416,900:
https://www.fool.com/money/research/average-house-price-state/
The federal minimum wage is $7.25 an hour.
https://www.dol.gov/general/topic/wages/minimumwage
So that 10% down of $41,690 is now 5,750 hours of minimum wage work. More than double the 1,975 hours it was in 1974. In order for it to be 1,975 hours, the minimum wage would have to be $21.11 per hour.
The full house? 57,503 hours of minimum wage work at $7.25 an hour (1,438 weeks or 27.6 years), again, more than double the 17,950 hours needed to pay off a 1974 house. In order to pay off a $416,900 house in 17,950 hours, the minimum wage would need to be $23.23 per hour.
I think something important missing here from the maths is that taking longer to buy the house makes it astronomically more expensive due to compound interest on your mortgage.
A lower wage means you’re more likely to only make minimum payments on your mortgage, and thus spend more money on interest.
On a 30 year mortgage on the average house, 6.73% interest rate (average in 2024), the total repayments come to $996,840, which is 137,500 hours, or 66 years of minimum wage work at 40 hours a week. Sure seems like a problem when that’s longer than the term of the mortgage - at minimum wage you can’t outpace the mortgage rates
Completing the same calculations with a 30 year mortgage in 1974 gives us a house costing a total of $90,457, or 22 years of minimum wage work. Still a little ridiculous, but doable on 2 incomes.
I think a further thing to point out in this math… is we’d also need to take into account average transportation and food expenses. Because while I’m not smart enough to do the math to calculate it out. On top of say housing relative to income doubling. Prices of necessities also need to be calculated out. If housing costs scaled with wages, but food cost doubled wages, that would still be a large factor on buying power.
Most items have at least doubled in price since then, so it’s a good thing to point out. Hell, the price of Taco Bell has doubled since the 90s alone. College prices have risen more than 1,000%.
Add on that we also have more expenses considered “essential” today as well. Things like the internet and cell phones didn’t exist in the 70s, and are incredibly important to simply keeping a job today.
Agreed, though also does need to be scaled with the time you are comparing to’s essentials as well. IE land line phones were essential before we reached a point where cellphones are allowed to be used for similar services. But yeah fully agreed in modern times… Essential living cost should be
“Food”
“Rent/Housing”
“Utilities” (IE power/water/Sewage etc…)
“transportation”
“Internet + Celphone”.
I still think the key flaw in thinking for 1974 or 2025 is that minimum wage was never intended to be able to purchase a home. Rent an apartment with room-mates? Sure. But nobody earning minimum wage at any point should expect to be able to buy a home. It’s literally the minimum.
In 1970 you could rent an apartment for $108.
The federal minumum wage in 1970 was $1.60 an hour.
So at 40 hours a week, you were making $268.80 a month, your rent was 40% of your income. Rule of thumb is 33% so you’re over, but still functional. Got a room-mate? 100% doable.
Now the average apartment is $1,378 for a 2 bedroom.
https://www.statista.com/statistics/1063502/average-monthly-apartment-rent-usa/
With the federal minimum wage of $7.25, you’re only making $1,218 a month. You’re underwater at that point. Rent is 113% your income.
With 2 bedrooms, to get it to 1970 levels, it would have to be rented by 3 people, 3,654 monthly income, rent would be around 37% the combined income.
Mortgages don’t typically involve compound interest, unless you miss payments. In order to actually pay off the mortgage the payment has to be higher the the interest for the same period. It’s expensive because borrowing money for 30 years is expensive even at low rates.
it warms my heart everytime i see that i inspired a nerd to comment a whole phone screen of maths 🥲
Do you have math behind this posting? Or is your number randomly generated?
more than double
FYI, that’s more than triple.
17,950 * 3 = 53,850 < 57,503
Many questions here.
But what is this 10% down?
Used to be if you didn’t put 20% down, you would have to get PMI, which was an additional monthly charge (though still worth it because that’s way better than paying rent.)
I put just under 8% down on my house and the PMI is negligible. Mortgage is $2,000 a month and IIRC, PMI is like $100. Homeowners insurance is worse, hell, my CAR insurance is worse.
insane if true
It’s actually quite difficult to compare like-for-like.
You can take the average or median price, but then this ignores the fact that as more people move towards the big cities, the average house isn’t the same thing as it was in 1970.
The other problem is overlooking interest rates. The 70s and early 80s was an extremely volatile time, with typical mortgage rates hitting over 10%, 15%, and over 20% at various points. Taking out a $12,000 mortgage ran the risk of your monthly repayments shooting up to $200 in interest alone, at a time when minimum wage was $267/month.
So, $66 is probably true for a very particular interpretation, but I’m sure you could just as easily find a way for it to come out as $65 or $67.
None of the above should be read as a defence of capitalism or of landlords, just pointing out some details that often get missed.
The house my grandfather bought in 1968 cost him 19500.
I bought this exact house from my mom (who bought it from him.
I paid near 500,000.
I am comparing like for like, only because there’s been zero renovations done and no modern things out into the house other then going from oil to Nat gas for heat and electric to gas for hot water.
Everything is original, until now…house will be reassessed afterwards and guaranteed to go up more
Ah but that’s my point, you can’t compare like for like because the value of a house is far more than just the physical building. It’s location, location, location, and the town your house is in is a whole different place to what it was in 1968.
Again, not defending the state of the market, just pointing out that extrapolating this out to the requirements of minimum wage is more complicated that calculating 500,000/19,500
Fixed rate mortgages have been standard in the US since the 1930s
Variable rates are still available and common. They tend to be slightly lower rates than fixed rate mortgages due to volatility risks.
I interpreted their remark to be more about the fixed rate though. The $20,000 house could have a 20% fix interest loan.
They did say “shooting up”, so maybe they are presuming variable rate mortgages.
i could live on $20/hr. we’re not the greedy ones.
IIRC from when I looked this up a few years ago, $25/hr would match the inflation adjusted minimum wage from 1952.
sounds about right. my dad was born in 1954, and that’s what he thinks i should be earning
Not that you’d be able to afford anywhere near the same quality of life at that wage now. That’s where something like $66 is probably more accurate for actual cost of living increases.
my friend, you don’t even own your belongings any more. i wish that i could just make enough to live this out, but shareholders demand equity.
The solution is to just become a shareholder obviously. Just get a small million dollar loan from your dad and get started.
/s obviously
All you need to be a shareholder is one share. That could be as little as $10 for some stocks.
honest question: i don’t know enough to know why it might be good, but isn’t the whole idea of the stock market just kinda wrecking fucking everything?
Oh yes, it definitely is.
But shareholders are the ones with actual power over companies. They are the ones the corporate executives fear. Not the government or the public. Assuming the execs don’t also own a majority of shares that is.
Ooh jeez… Who’s going to tell them?
If you subscribe to the definition of inflation that assumes renting instead of home ownership and homesteading in rural frontiers with challenging weather (deserts, swamps, tundra) rather than in gentrified places with pleasant weather (e.g. every existing metropolitan area).
The way I see it, unless people somehow shrink in size or a wormhole opens to another Earth-like planet, real estate prices are inversely correlated to population which continues to rise.
So just build more housing, then build public transit so they can go anywhere they want (actually build the transit first). 50,000USD builds a 2bd apartment in any city of 10+mil in China. And they’re not running out of room.
nah we want the whole bakery
That logo vaguely looks like a cock and balls
Comparing your life to how life was 50yrs ago is pointless. Whatever results the comparison reveals are not going to change your current living situation. Compare your living situation to 100 years ago and you’re doing great, yet your current situation remains the same. Study the here and now, current opportunities, where opportunities will exist in the future, and strive for some level of financial literacy. All this can be done for free.
This entire line of thought comes from the fact that we have parents who are actively in our lives every damn day saying that nobody deserves to earn over $7.50 / hr because they only earned like $2-$3 / hr in the 70s. They are an active detriment that is preventing any means of progress.
They will not entertain information about buying power, inflation, or ballooning revenues / puckering salaries. This is a sore spot with millennials for this reason. We are not the ones bringing this up, our parents, who did enjoy life 50 years ago, are.
You can pretend that this is about having a toilet indoors all you’d like, they had access to pensions back then.
My mom didn’t work. My dad made minimum wage. I grew up in a 5 bedroom, 2 story house. My mom and dad each had a car, and my dad always had a truck to haul shit around.
I have been called a liar at least 100 times in the last 10 years when I say this online.
My mom and dad paid less than 30k for that house. It needed a little work, but we were able to move into it as soon as they closed on the loan.
They were able to borrow against their equity any time they needed anything.
Sure, we didn’t have fancy vacations. We mostly went to South Holston (Tennessee) and camped and fished. A few times we went to Dollywood.
My kids have never had a vacation because I could never afford it. I live in a shitty apartment and we can barely afford that.
I fucking miss having all of that space so bad, and if I had been smart I would have fought with everything in me to keep that place and I’d have found a way to do the repairs it needed.
Boomers: Had a functioning government that raised minimum wage 11 times over 20 years. (Because popular policies could be enacted in their functioning government).
Millenials: Had a corporate controlled government that couldn’t raise minimum wage once in 20 years. (Because popular policies are never enacted by corporate backed politicians).
You: Study everything you can that isn’t about how capitalism strangled every American child’s collective futures, and will grow to do the same across the world.
No offense, but how about we study what’s removing our opportunities so we still have them in 20 years instead of chasing whatever’s next to be cast off the oligarchs table.
uhh no. comparing our actual life experience today with the actual life experiences of our parents and grandparents is the only way to know if we’re doing better, the same, or worse.
your argument is the argument of the domestic abuser and the authoritarian government and the rapacious theologian.
“be grateful for what you have” or “it could be worse” is shitty advice.
“The Coming Collapse of the Middle Class”
Elizabeth Warren a long time ago told us what was coming, and it’s either here or nearly here.
Okay, Boomer.
“you’re doing great”
sure buddy
Thanks, papa Musk!
If given the option, I would take 1925 with its great depression, world wars and pandemics over 2025.
Our current society has been insidiously changed over the last 40 years to create an indentured population to serve a select few, this comes at the cost of a mass extinction event which in all honesty will most likely cause the human race to go the way of the dodo.
So no amount of social mobility will fix this, I’m sorry but the world is a nightmare hellscape. Thank god we can compartmentalize.
It isn’t. Not even close. This says $12 https://www.epi.org/blog/the-value-of-the-federal-minimum-wage-is-at-its-lowest-point-in-66-years/
That’s just straight inflation, the meme is talking about housing inflation, which has been higher than monetary inflation.
the post isn’t about just correcting the amount for inflation. it’s saying this is what you need to match the percentage of the cost of buying a home at the time. the math could still be wrong but they’re not talking about the same value.
