What these analyses normally miss:<p>- Building codes have changed. Things are much safer now than in the past. The chance of dying in a fire has decreased 1/4 since 1950 [1].<p>- Houses are much bigger. Houses have almost tripled in size [2].<p>- Quality of finishes have increased. People will probably debate me on this because things have generally gotten cheaper over time but that means that the expectation for a house now is quartz countertops and not vinyl.<p>- Desirability has changed. For example, the number of sports teams have tripled since 1950.<p>[1] - <a href="https://www.statista.com/statistics/526310/timeline-deaths-number-injury-related-due-to-fire-flames-smoke-in-us/" rel="nofollow">https://www.statista.com/statistics/526310/timeline-deaths-n...</a><p>[2] - <a href="https://www.ahs.com/home-matters/real-estate/the-2022-american-home-size-index/" rel="nofollow">https://www.ahs.com/home-matters/real-estate/the-2022-americ...</a>
The short answer is that a house is no longer a place to live, but an abstract financial asset. The problem with divorcing occupation and use from finance and ownership concerns remediation of grievances. The benefit of such a system concerns maximizing the building's utility. I'm personally in favor of a more boring housing market, in addition to automatic tenant enrollment in equity-sharing programs (ie, due to living in a building and paying rent, the person who experiences hardship and loses tenancy still has some small, depreciating ownership based upon what they paid as rent). This helps solve the problem of financial engagement for the less financially literate, in addition to enabling higher-density housing to be built.
Would be useful to see the cost of just the land as well if thats possible. As others have pointed out, the size and feature expectation inflation has to be factored in here. The little "wartime 4" I grew up in north of Toronto was smaller than a lot of "garage-ma-halls" these days and didn't really have insulation. It was a regular feature in winters to get ice on the living room window. My "modest" (by today's standards) house would be a rich persons place in the 70s.
The US M2 in 1950 was <$300 billion and in 2024 was >$20,500 billion (70x increase). The article is using an inflation estimate of ~13x. The author doesn't give an average but the top 3 states by population (California, Texas, Florida) saw increases of 65x, 39x and 44x respectively.<p>I think it is more likely that house prices have slightly decreased in real terms and they are tracking closer to the M2 as houses are assets not consumables. This gels with home ownership [0] which is generally stable or higher than usual, it doesn't look like people are actually struggling to acquire homes all that much. Especially since I expect household size is shrinking.<p>Most of the pain people are feeling is because of the insanity leading up to and flowing from the '07 crisis if the home ownership rates are good evidence.<p>[0] <a href="https://en.wikipedia.org/wiki/Homeownership_in_the_United_States" rel="nofollow">https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...</a>
If 101 people want to move to a city that has 100 houses, and they are prevented from building more, then house prices will be bid up as high as they can afford to pay.<p>The only solution is to legalize building more homes, especially at higher densities that allow more people to live in desirable locations.
There has been incredible inflation for items that cannot be exported in the US. Think healthcare, education and housing. Things that could be sent overseas like TVs, Computers, Clothing has seen their prices deflate. The combo of the two is what is called inflation but the later hides the fact we have increased our money supply incredibly since 1950 and that will show in the things that did not find a way to get cheaper.
I only want to add that in 1950 a significant number of homes still did not have indoor plumbing, and I'd guess that a lot of existing housing stock was small square footage. I don't want to say there wasn't housing inflation, but I do think the the nature of housing stock has changed too.
Depends if it's a liability or not. For many it's like a big savings account. The bigger the better. Inflation protected.
You can't trust the government not keep printing more and more money and diluting your after tax savings. But house prices are linked to physical structure. Government can't just print more houses out of thin air. So they appreciate against inflated paper currency which they do just print out of thin air sometimes.<p>Also, having owned older built Canadian houses, they're a constant maintenance. Many were not well designed and don't age well (wood construction). So for them to still appreciate tells you how much government has been busy printing. Where does all that money go? I sometimes wonder.<p>Indebted servitude to banks, a good chunk of a lifetime of work to pay off one of these mortgages.
And waging so government can take most of it in taxes.
I'm not sure if this is sustainable much longer without a revolt in Canada... at least younger Canadians may one day decide it's not a good system and turn the tables.
Average house price in Canada is like 700k now, average wage is like 54k.
It needs to account for the difference is sizes. Average square footage in 1950 was just under 1000 sqft; in 2024, it's more like 2300.<p>In Texas, for example, the inflation adjusted cost per square foot was $79 in 1950, and about $130 in 2024. Still a steep rise, but a 60% jump instead of the 285% without considering square footage.
Prices from 1950 is relatively useless because they don’t count the effect of women entering the workforce in the 1970s and 80s. Once women were working en masse in the 1980s house prices spiked because there was now 2 incomes that could be used to pay for the house. This inflation is seen in the data but you can’t see it from this map.<p>The higher house prices get the more desperate people are to use every cent to buy a house. That’s why things like mortgage tax deduction is useless because that money immediately gets factored into increasing the amount of mortgage you can get and spikes the house prices.<p>It’s fascinating and sad because we are at the stage now where hedge funds are driving up the prices of single family homes so that millennials and gen z become renters for the rest of their lives.
Given that even in the least attractive locations, home prices have grown around 100 per cent, we can probably chalk those 100 per cent up to general improvements of homes (size, appliances etc.) Neither homes, nor cars, nor planes are the same as they were in 1950.<p>The rest is the "true" growth.
I believe these kind of data is slightly misleading, because the price is directly affected by everything else that surrounds building a house these days.<p>Just some examples zoning/land use, building standards codes (electrical, plumbing, mechanical), permits, compliance, inspections, water, sewage, etc etc.<p>I am not advocating a wild west for building, but rules & regulations always increases and with that comes more costs.<p>This of course also drives higher rents, and if you think they are high now...
What kind of inflation? Bc inflation numbers are artificial and are often doctored. Like here in NL where they conveniently adjusted the "basket"
Houses can be a good investment or they can be cheap.<p>A good investment outperforms its alternative asset classes. We chose policies that ensured they’d be a good investment. For housing to become cheap in our lifetimes, existing homeowners will need to experience an enormous capital loss.<p>This has been exacerbated by the long-term decline of interest rates. Sticker price and interest rate are roughly inversely correlated since the monthly payment a prospective owner can afford is roughly fixed. Over the past fifty years, boomers have been able to regularly refinance their loans into lower and lower interest rates as prices skyrocketed. This also made it easy to move since you could trade up on your home’s increased value relative to the remaining mortgage.<p>That pathway isn’t as available to millennials who bought at sub-4% interest rates, and it likely never will be.
Should also also adjust for price/sqft and energy efficiency/insulation savings, lack of plumbing in some and ~15% without electricity. And also externalities of 1950s air conditioning designs that would have depleted the ozone by now if we stayed with them, and things like lead paint causing mental development issues.<p>Median wages are up since significantly since 1950 (most stagnation was after 1970s), and house building is expected to be heavily affected by purchasing power parity, using a heavy portion of local labor.<p>Occupational deaths in construction went from 8 per thousand workers in 1950 to below 2 per thousand today, but I couldn't find numbers for residential. In the 1950s, if there was as much highschool attendance as today, out of each medium sized highschool you'd expect a higher than 50% chance of one of your peers to eventually die in a construction accident.
I suppose what this illustrates is that, while the CPI does include rent (or “owners equivalent rent”) in its calculation, the equivalent rent is either not representative of the median home, or house prices have grown much faster than rent over the past 75 years… and yet the apparent popularity of being a “real estate investor” seems only to have increased, which suggests to me that the rent/buy ratio has gotten more favorable, not less
I may well be completely wrong, I am not a social scientist or involved with the housing market; my sense of it is that building has been ever harder, while demand - more people with more money - has continued to rise.<p>Prices, accordingly, have risen.<p>I think what we see here is primarily a function of constrained supply.
Now the next question is why? Why the houses prices have surged in the past decades. And why is it a worldwide situation (at least in developed countries)?
TLDR; it's the density death spiral.<p>The most expensive part of a house is the land it stands on (which also determines the building codes and the local labor price).
This is still a bit spun though. Median <i>income</i> has risen even faster!<p>Some quick unverified googling says that in 1950 US Median income was $3300, and that inflation since 1950 has been a 10.89x increase. US median income today is $80k.<p>So indeed, housing has gotten a lot more expensive in real terms. But we've all gotten richer, and on average <i>A US Household is spending less of its income on housing today than in 1950, not more.</i><p>California, it's true, is sort of out of control. But that's clearly a local thing in two metro areas, not a problem with the economy as a whole.