A Basic Necessity – Part 1

Eighty years ago, on December 7th, 1941, the median house price in America was ~US$7K, or around US$130K in 2021 dollars. Median, annual household income in 1941 was about US$2,500. That’s a ratio of 3.5:1, house price to household income.

In the 50’s the ratio evened out at around 2:1 in favor of buyers, and stayed that way for a couple decades, until it started ramping up in the 70’s, culminating at 4:1 in 2020 nationwide. However, in many American cities the ratio is more like 8:1 or above, even in the so-called fly-over states.

My family and I live in a fly-over state, and our house-to-income ratio is around 6:1, at least for houses we’re willing to consider a home. And even those houses aren’t that great, compared to the house I bought in Dallas in 2003 (which happened to be in line 1941 median house prices, around US$130K, as compared to the median price of $400K today).

Bottom line: housing is expensive as hell.

Welcome to the new normal. It’s probably not going down. My instinct tells me the whole market is rigged, but it’s hard to get solid facts on what’s happening because there’s high-dollar incentive to obscure the facts.

One thing’s for sure: we’re entering uncharted territory for the price of one of three basic necessities, a house.

Equity-poor, first-time house-buyers are screwed. (Including me, as I haven’t bought a house in the U.S. in over three years).

Note that I will never use real estate lingo like “home”. A cardboard box can be a home, as George Carlin once pointed out.

Residential real estate is property and a structure that supports living. If you pack emotion into what will most likely be the most expensive thing you ever buy, then you are a fool.

Like most people, I don’t want to be a fool. I want to understand the trends and new realities, because we are entering a new reality, for sure.

Is owning still a thing? In real estate lingo, “owning” means paying another landlord, the bank, with many more expenses tacked on (insurance, tax, maintenance, time). So how do these expenses compare to rent?

This is the first of a series of residential real estate explorations. At this point, I don’t even know where to start. But I’ll find out.

Oh, and December 7th, 1941, is a day that will live in infamy, as one of our greatest presidents phrased it. Having dedicated a decade of my life working with forward-deployed Navy in the Pacific (in Japan, no less), the day resonates with me.

In those days people had resilience. I will, too.