Wednesday, September 21, 2016

50 Years of New Home Prices: It Tells Us...

...more than inflation, more than the wealth gap, and so many other facts that it is mind boggling. One could do a deeper study of this report and learn that globalization has basically destroyed the American middle class and the reach for social mobility in our society. It not only shows the lie of free trade, but how the Federal Reserve has destroyed the purchasing power of the dollar and lowered our standard of living.
In 1966 the cost for a new home was $23,300 which corresponds in today's money to $173K. Dear reader, as you know, you cannot buy a new home in America for $173K. So, you respond. My study of new home prices implies so many other aspects that I could write a book just on the correlation of price and income that equates to our standard of living and social mobility which is the greatest aspect of the concept of "America." It is a big part of the American Dream.
For instance, the average income in 1966 was just $6900 a year. If you had the average income or two wage earners that totaled that amount, you basically had one quarter of the purchase price of a new home in pay with take home wages.
two wage earners are the norm which was not the case back in 1966.  Today, young, single people work two jobs to make ends meet. To live within their means.  Even with today's dual incomes, first time buyers are lacking in the home buying market. Tell me what I don't know, you say. It is not that all of a sudden no one wants the burden of home ownership, it is just basic economics. They can't afford it. As we delve further into the recent history of new home prices, we find that wages have not kept up with the cost for a new home. Why, you ask? Simple: the Federal Reserve and the government have spent and printed more dollars than they are really worth. In simple terms, they spent more than revenues. They do not live within their means. The Fed worked in conjunction with the government to keep rates low to finance all the spending. This implies and what I believe, that our government and the Federal Reserve is corrupt!
In 1966 we were involved in a war, just like today. We never give peace a chance. Anyway, the cost to engage in the fights for democracy or whatever slogan is used, catches up with the economy. The printing of dollars lowers its purchasing power. The media just uses one word - inflation. The government uses the same word as if that answered any question as to why things like food and energy and home prices cost more.
In 1966 a construction company used American made wallboard, nails, wood, cement, paint, appliances, etc. in making that new home. Not today. How many jobs were lost in this one category in our economy says it all. I could go on and on, but let's continue.
Prices for homes generally rose at around one to two percent a year. The American Dream was still alive even in the daunting face of free trade and globalization.
1st. Milestone
1985 saw a record as the cost for a new home rose over $100K for the first time. In today's money that is equivalent to $243,550. Needless to say that as prices rose, the belief in continuing home prices rose along with it.
Next Milestone
In 1994, the next big number came. The price for a new home rose over $150K. In today's money that equates to $250,880. Needless to remind you that people became aware that incomes were not rising along with the cost for a new home. This, however, could not dampen the desire for ones own castle.
New Millennium
In 2000 the price for a new home soared like the zeros in the date. The new milestone of $207K should have gotten everyone's attention. Protests should have been staged, but alas, everyone worked even harder to get their piece of the pie. In today's income that equals $289,280. You would need $70K income to have one-quarter of the purchase price. No wonder I didn't own a home back in 2000. That $70K income is around $20K more than the average income and remember, many households use two incomes to reach the average.
In just six years, the cost of a new home rose past $305K and in today's money that is $365,000. No wonder there was a housing crash in 2008. Keep in mind that home prices have returned to that level.
In 2015, the cost for a new home is $360K. The average income, and remember, many households use two incomes to reach the number, is $56,000 a year. Simple math tells us that new home prices rose 52 times the income of 1966, and our income has risen by only 8x. This is how much the Federal Reserve and government has depreciated the value of our dollars. We no longer make our own products like appliances that go into a new home. Thank you, globalization for lowering our standard of living. The average income only buys one-sixth of the cost for a new home. We are falling further in our standard of living as free trade steals our jobs, robs us of our social mobility and shills say globalization makes our economy better. This is another reason to End the Fed!