Housing prices and salaries 30 years from now.

[Jamison]

I was talking this issue over with a real estate broker I know who also sells securities. I also work in the field of real estate.

As of today the average home in America sells for around $230,000. I don't know what you'd consider "average", but around where I live $230,000 is only going to get you about a 1,000 sq. ft. 2 bed/1 bath home that's 30+ years old and is in need of repair.

As of today the average salary in America is somewhere between $40-$45,000 per year from what I've read.

Our children are screwed, and here's why:

This broker I know has figured the average home in America will cost anywhere from $1-1.2 million. I agreed with him on this figure. He has figured that the averge American's salary might only rise to $50-$55,000 a year 30 years from now. He claims this will not rise much because of globalization, and due to the fact real wages have actually fallen since about 1973.

Man, I feel sorry for all these kids nowadays.

[CrispyQ]

1. The American dream has turned into a nightmare.

When the masses are cold & hungry & living on the streets, there will be no fences high enough to keep them from storming the gated communities with their picks & axes. The rich will suffer so much more when this happens than if they had just been generous in spirit & not so stingy toward those less fortunate than them.

[On the Road]

2. Mortgages Right Now are About Half of Salaries

They are at the extreme upper end of the range. (The lower is one fourth.) There's no more room for them to move.

The combination of $1M homes and $50K salaries does not compute. It will not happen because not enough people will be able afford the mortgages. Even rich investors won't be able to keep prices up because they won't be able to cover costs by renting them out.

This is a valuable statistic, but I draw a different lesson. The people being screwed are the ones overbuying big houses with interest-only ARMs.

[applegrove]

3. When couples went from one person working to two in the 1970s,

it pushed the prices of houses up. The same will happen here. As salaries go down, house prices will begin to fall. That is why the people buying houses will be in trouble. They think of them as huge investment - but when the boomers all retire and move to smaller homes - there will be fewer people and smaller salaries and the market for homes will have to adjust. People will be caught up in huge homes they cannot get rid of for more than they paid for them.

That is why the world worries about the bubble.

[fberknm]

4. Who Will Buy?

First, a broker is nothing more than a salesman. Nothing against salesmen, but a B.S. in Economics does not make one an Economist. You might consider a second source for information on investments if your broker is telling you nonsense like this.

If salaries are going to stagnate then so will house prices. The prices react to the ability of people to purchase the homes. This is an economic lesson that most people, DUers and Dittoheads alike, recognize.

Here in SoCal, houses are incredibly expensive, but wages are also much higher.

Now, having said this, housing prices as a ratio of income can rise above where they are now. The mortgage industry in the U.S. is not very advanced, in spite of what many people feel. For example, we have yet to go to intergenerational mortgages.

[MsTryska]

5. Intergenerational....

like the japanese prior to their bursting bubble?


I would disagree with your comments about the mortgage industry - on one level i do agree that they're fairly simple - for the homeowner -

it's the packaging ont he backend and the derivatives,a dn the stuff propping up Fannie mae and freddie mac that make things confusing, and will cause us all far more trouble than they're worth should things slide downhill.

[newyawker99]

6. Hi fberknm!!

Welcome to DU!! :toast:

[bj2110]

7. No way avg house is over a million bucks in 30 years. Look at this chart

I say 600K max. Pretty much a linear increase from 40K 30 yrs ago to 250K now. Extrapolate that and you get around 500K or so in another 30 yrs. The housing boom of today will settle and fall back to the long term trend.



Now, you may be right on about salaries. maybe only a 30% - 50% increase. I'm just pulling that out of my arse, though...

[depakid]

8. All bets are of 30 years from now

Making projections like that in the face of Peak Oil is laughable- your broker is living in a fantasy world...

[Mr.Green93]

9. 30 years from now

All housing will be free all health care will be free. Everyone will have good jobs in a sustainable endeavor.

[SoCalDem]

10. Housing will change. There will be more shared housing

There is no other way. I can foresee the revival of duplexes and tri-plexes. There will be some huge zoning battles ahead to, because the ones with money and huge houses will object strenuously when others in their area start "sharing"..

Foe people with agiing parents, this is also a good thing, because the parent can retain some independence, and yet now be right down the hall..and when the parent passes on, their place can be a rental..

People in the depression era shared housing..and it really wasn;t until after WWII, that young couples got their own places before Mom& Dad passed on..

We may have killed the golden goose, and there will be no more eggs for us..