I'll never forget when I sat down with my parents and we talked housing prices. They said "why aren't you building something new if the old buildings are so expensive?"
I had to break it to them that a plot of land is not $10k, it's $200-300k. Then add the actual cost of housing construction and you're easily looking at a MINIMUM of $500k for any new construction
They told me they thought it'd be closer to $100k even after they adjusted for inflation
I had to sit them down and show my parents that while when they were my age there was a short period where interest was around 20%, the cost of a home has skyrocketed so much since then that even at the current 5ish% my interest alone would be higher than their entire mortgage payment back then.
Yeah, when I talked to my parents about buying their house in the 80s they were like "but we paid something like 12-15%." Sure, but that was on a house that was only 80k. Now people are paying 5-8% on 300k+.
Sure, except over the lifetime of a 25-30 year mortgage loan inflation helps them. Locking in at a $500 (or whatever it was) monthly payment probably sucked in the 80s, but was practically pocket change in 2010 dollars. Whereas people today are paying $2,000+ a month for their loans. That's going to suck for 25 years.
Housing prices have gone up. Wages have not increased at the same rate. So if their mortgage was 25% of their monthly income back then, ours today are 50%+
Average mortgage payments in the 80s were $600-$900, not $500. Again, a $600 mortgage payment in 1980 with inflation would be over $2400 today.
Average mortgage payment in 2025 was right about $2000.
Why do you think inflation on a 30 year mortgage today won't have the same effect as inflation on a 30 year mortgage back then?
Also, median family income according to the Census Bureau was $21000/year in 1980, or $1750 per month. A $600 mortgage payment was 34% of a $1750 monthly income.
Median household income in 2025 was $87460/year or $7288/month. The average $2000 mortgage payment was 27.4% of a $7288 monthly income.
So to be clear, median mortgage payments in 1980 were higher as a proportion of median income than they are today.
one time during the first major recession of our millennial doom, my mom was like, "i don't understand, i put myself and your father through college on a summer job making..."
we didn't even get to the math. she made more in number of dollars unadjusted for inflation in 1974 than i was in 2009. she was earning like $17/hour or something crazy.
High interests is actually great for the average consumer. We should want to own things and pay as much as possible with cash. Higher interests allow us to do that since it pushes consumer prices down
Low interest rates just grinds the economy to a halt as soon as it's raised a little bit
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u/Ok-Primary2176 18h ago
I'll never forget when I sat down with my parents and we talked housing prices. They said "why aren't you building something new if the old buildings are so expensive?"
I had to break it to them that a plot of land is not $10k, it's $200-300k. Then add the actual cost of housing construction and you're easily looking at a MINIMUM of $500k for any new construction
They told me they thought it'd be closer to $100k even after they adjusted for inflation