Housing Prices

[Divot]

Several people (including moderators) have PM'd me and said they would like to continue this discussion on the board since they are also interested in this topic. What we are discussing impacts them as much as it does us. I'll start a new thread so this one can be dedicated to the project in the title.

Ok lets move it to a new thread. If you want to argue semantics it will continue to be circular. If you think that wages and housing costs can remain this divergent: explain.

[pete11]

I do not believe that housing costs and wages can remain this divergent. I've said it several times already. I'm not debating if we are in a housing bubble. I think that there are areas of the country that will see housing prices decline or stay flat until real wages catch up.

What I am debating is if housing prices can increase above the rate of inflation. I believe that they can and have over the long run due to positive in real wages.

[ruchele]

i'm finding this all very interesting although admittedly i do not know what the hell you people are talking about it, but you both seem so sincere!

and now, i need a cigarette, and perhaps a shower.

[TheAnk]

Right. Stocks have actually beaten inflation over the long haul. You are right wage growth is tied to housing costs, but mostly because inflation is tied to wage increases, see the connection?

Housing is a basic human need and 28% of income is a pretty constant # over the years.

[TheAnk]

By the way, good to have some finance guys in here.. Balance out the art and design flock..

[TheAnk]

Yeah but 19k is still the median, there are also people below it. It would be easier for the government programs to assist these people, if residential prices hadn't strayed so far from affordable metrics. A 300k house using FHA affordability (28% of gross) requires a salary of about 100k to afford. Do you see the disconnect?

Then again what do you do with the people making under 19k? I'm not trying to be argumentative. You can't make these numbers work. Its like explaining why pets.com should trade @ 1000 times future earnings.

[Cotuit]

By the way, good to have some finance guys in here.. Balance out the art and design flock..

[TheAnk]

Its a little dated, well a lot dated, 6 years, but parcel breakdown by land use:

http://204.17.79.244/profiles/maprnks/oln_plu.gif

[Cotuit]

*Personal anguish, pain of being a landlord, and the resulting general maliase towards people in general resluting from landlording not included in figures..

[JJK5]

Yes, that's quite a cost to swallow. But a lot of people in O'ville have extended families that would be filling those units.

[Cotuit]

Even worse. I'd never want to rent to family members.

[runawayjim]

Even worse. I'd never want to rent to family members.

[Divot]

Income has grown faster than inflation. This is going to be hard to read but it's the only way to post the data (it won't let me attach an excel spreadsheet).

first column is the year

second is the year-over-year percent change in personal per capita income (source: BEA)

third column is simply the second column indexed to 100 in the base year

forth column is the year-over-year percent change in CPI (source: BLS)

fifth column is the forth column indexed to 100.

Incomes have increased almost twice as fast as inflation (1126.6 vs. 604.4) from 1966-2005. These are the years that the database I happen to have open (Economy.com) has in it. I'm sure I could get other time periods if people think I'm mining the data...

Year Income CPI

1966 100.0 100.0

1967 6.3% 106.3 3.5% 103.5

1968 8.7% 115.5 4.6% 108.2

1969 8.4% 125.3 5.8% 114.5

1970 6.5% 133.4 5.7% 121.0

1971 6.3% 141.8 3.4% 125.0

1972 8.6% 154.0 3.4% 129.2

1973 10.9% 170.8 5.8% 136.8

1974 9.1% 186.4 11.0% 151.8

1975 8.1% 201.6 6.6% 161.8

1976 9.4% 220.6 4.8% 169.5

1977 9.6% 241.8 7.2% 181.7

1978 11.3% 269.3 9.5% 198.9

1979 10.9% 298.7 11.9% 222.7

1980 10.6% 330.3 11.8% 249.0

1981 11.2% 367.3 8.4% 269.9

1982 6.1% 389.8 4.3% 281.4

1983 5.7% 412.1 4.1% 292.9

1984 10.1% 453.7 4.5% 306.1

1985 6.2% 482.0 3.9% 318.2

1986 4.6% 504.3 3.9% 330.5

1987 5.2% 530.4 4.0% 343.6

1988 6.7% 566.0 4.3% 358.5

1989 6.9% 604.8 4.6% 375.2

1990 5.2% 636.1 4.7% 392.6

1991 2.1% 649.6 3.9% 408.0

1992 4.8% 681.1 2.8% 419.5

1993 2.4% 697.1 3.0% 431.9

1994 3.9% 724.1 2.7% 443.8

1995 4.1% 753.6 3.4% 458.9

1996 4.8% 789.5 2.9% 472.1

1997 4.8% 827.4 3.0% 486.3

1998 6.1% 878.0 3.0% 501.1

1999 3.9% 912.4 2.3% 512.4

2000 6.8% 974.7 3.2% 529.0

2001 2.4% 998.5 3.8% 549.2

2002 0.8% 1006.2 3.0% 565.4

2003 2.1% 1027.5 2.0% 576.6

2004 5.2% 1080.7 2.3% 589.7

2005 4.2% 1126.6 2.5% 604.4

[Divot]

They can and have...

[TheAnk]

Oh my.. Do you know how completely inaccurate the CPI is?? Do you know what a hedonic adjustment is??

Please don't use the CPI in relation to income and wage... Do you know how the CPI works? Don't believe the line in your text book "wage outpaces inflation".. Its simply a way to disguise the blatant misuse of fiat currency by your government.. The theme song for our money? Roberta Flack - Killing Me Softly.. The CPI is a tool to convince the masses that printing up money like a drunken sailor and producing massive national debt does not matter..

Take housing in the CPI... House prices, not included.. Bizzare yes? Most people's biggest "investment", not shown.. Instead, they use owner's expected rent equivalent.. As was said here before, rents have not paced home price..

I want you to explain to me how real wages have outpaced inflation, and in your response explain to me HOW a one income, seven kid family in 1950 could survive easily, but how a 2 income 1 kid family today is struggling to get by.. Not what your text book says.. Just why you think that is..

[brick]

I think $850 is a little aggressive for rents in the abstract. However, I agree with the thought that the immigrant families will pool resources to get these things done.

I went on several home tours in the Boston area when my friend was buying. Some of the things we saw (like 11 people living in a 3 bedroom apartment) seemed completely disgusting to us (and are beyond occupancy standards set by the state) but were perfectly normal to them.

I assume that some of the places in Olneyville have similar circumstances.

[TheAnk]

So since your money is constantly devalued by adding currency, prices constantly rise as there is more money for goods, and you are worse off every year..

So the best way to combat the destruction of the dollar? Buy inflationary investments at fixed dollar costs.. Thats why your stock market outpaces inflation, why housing "always" goes up.. If you sat on a pile of cash, say $100,000 for 10 years, it would be worth $75k in real dollars... Add your savings account rate, and you still lose.. Its ugly.. Take that 100k and buy something inflationary, and make the gov work for you..

Nothing is certain but death, taxes, and rampant gov induced inflation..

[Divot]

I deal with numbers. If you can point me to a better source for inflation I'll take a look at it. It's really hard to argue with people who can say whatever they want without data... I would argue the average quality of life for the median family is far above where it was in the 1950s (two SUVs, much larger house, every kid having their own bedroom, better quality food, the 50 inch plasma TV hanging on the wall, etc) and you can say the opposite. There is no way to show who is right... If you want to show me numbers to back up your claims then we can talk otherwise you are simply chicken little crying the sky is falling.

Oh my.. Do you know how completely inaccurate the CPI is?? Do you know what a hedonic adjustment is??

Please don't use the CPI in relation to income and wage... Do you know how the CPI works? Don't believe the line in your text book "wage outpaces inflation".. Its simply a way to disguise the blatant misuse of fiat currency by your government.. The theme song for our money? Roberta Flack - Killing Me Softly.. The CPI is a tool to convince the masses that printing up money like a drunken sailor and producing massive national debt does not matter..

Take housing in the CPI... House prices, not included.. Bizzare yes? Most people's biggest "investment", not shown.. Instead, they use owner's expected rent equivalent.. As was said here before, rents have not paced home price..

I want you to explain to me how real wages have outpaced inflation, and in your response explain to me HOW a one income, seven kid family in 1950 could survive easily, but how a 2 income 1 kid family today is struggling to get by.. Not what your text book says.. Just why you think that is..

[TheAnk]

Check consumer debt current vs 1950... You will get your explanation..

The sky is not falling.. I'm simply letting you know how money works.. I feel that you read some text, and are posting it here.. I see your data, your explanations and I know that anyone that says income has outpaced inflation has much to learn about econ in the real world... I would like to know why you think the minimum wage puts a person below the poverty level..

I can make any number say anything, and then the same data set to say the opposite.. So can you..

I'm telling you things you will realize later.. I see you know econ, and are schooled, but have yet to grasp how the fiat dollar works.. You will.. You understand one side of the equasion, the benefits to a stable economy and society as a whole, but do not understand the detriments to the wage earning individual.. Thats the difference between textbook and real world..

I am amazed that they do not teach "money" to people in school... Seriously, do we really need metal shop in high school? Woodworking?

[Divot]

I'm talking about the median person. Perhaps the lowest income earners are worse off. Not to be cold hearted but they are irrelevant to what we are talking about since they were never homeowners to begin with. Homeownership is higher then it was in the 1950s across the board. The point I'm making (and I really don't understand why I need to keep saying it) is that real wages have been positive historically and this has translated into a higher quality of life for the average person in the US in every aspect of their life. This has also led to housing prices outpacing inflation. If you have numbers that support your claim please post them.

Check consumer debt current vs 1950... You will get your explanation..

The sky is not falling.. I'm simply letting you know how money works.. I feel that you read some text, and are posting it here.. I see your data, your explanations and I know that anyone that says income has outpaced inflation has much to learn about econ in the real world... I would like to know why you think the minimum wage puts a person below the poverty level..

I can make any number say anything, and then the same data set to say the opposite.. So can you..

I'm telling you things you will realize later.. I see you know econ, and are schooled, but have yet to grasp how the fiat dollar works.. You will.. You understand one side of the equasion, the benefits to a stable economy and society as a whole, but do not understand the detriments to the wage earning individual.. Thats the difference between textbook and real world..

I am amazed that they do not teach "money" to people in school... Seriously, do we really need metal shop in high school? Woodworking?

[TheAnk]

I'm talking about the median person. Perhaps the lowest income earners are worse off. Not to be cold hearted but they are irrelevant to what we are talking about since they were never homeowners to begin with. Homeownership is higher then it was in the 1950s across the board. The point I'm making (and I really don't understand why I need to keep saying it) is that real wages have been positive historically and this has translated into a higher quality of life for the average person in the US in every aspect of their life. This has also led to housing prices outpacing inflation. If you have numbers that support your claim please post them.

[Divot]

I think it's easier for me to buy a candy bar now then it was back 10 or 20 years ago because while my dollar buys less candy bars I have more dollars and so does the median person in the US. This is the definition of real wage growth (wages growing faster than inflation). The data supports what I am saying, it does not support what you are saying. Are the numbers perfect? No, of course not. You cannot model out GDP/inflation/wages perfectly but unless you have a better time series I'll stick to what's out there.

The reason you need to keep saying it is because "quality of life" and affordability are two different things.. You can have phenominal quality of life along with massive, crushing credit card debt.. The plasma TV, SUV, stainless appliances, and suffocating consumer debt..

How old are you? When you were a kid, how much did a candy bar cost? A soda? Are they more expensive now? If you answer is "no, they both are cheaper now", then you are right and I am wrong.. If not, apply that to everything, and you will have my numbers..

Your dollar buys less.. Every day.. This is indisputable..

Here are my numbers: The last time there was deflation was August 1955.. Since then, inflation has been constant.. Its SO constant, that when the Fed pats themselves on the back and says inflation is down, they mean that inflation is still happening, just a little bit less!!

[TheAnk]

I don't know any other way to say this, so here goes.. You are wrong...

You personally may be better off, but the bottom 4 quintiles are not.. The bottom rung you talked about being irrelevant greatly out number the rung you apparently are on..

Maybe you are richest one percent, I don't know.. But the rest of the country feels the squeeze...

[urbie]

[qu

[TheAnk]

I prefer to be original, but since you like "hard facts", here you go:

http://money.cnn.com/2006/08/28/news/economy/real_wages/

Not only did the bottom 4 quintiles not keep pace the last 3 years, that huge mass of people getting worse every year now reaches all the way up to individuals earning $80k.. The percent has now went from 80% to 90%..

Does "most workers" inculde the mythical Mr. Median?

You will find that this term is greatly flawed, especially in this instance. Which is why I don't see you use "mean" or "average".. Median is used perfectly to distort the facts of a population where the richest 1% owns half the wealth..

TheAnk:

The sad thing is, in about 50 yeahs you might staht doin some thinkin on youh own and by then you'll realize theyah ah only two certainties in life.

Divot:

Yeah? What are those?

TheAnk:

One, inflation. Two-- you dropped a hundred and fifty grand on an education you coulda' picked up for a dollah fifty in late chahges at the Public Library or free lesson from TheAnk.