Cost of real estate versus your salary, it's gotten way expensive

Even before the run up over the past 4 years in the US, real estate compared to the average annual salary has been skyrocketing for the past thirty years. The whole notion of the “american dream” of home ownership isn’t the same - without a college degree, and a middle class job with only one person working in the household, you could buy property that was 2x your annual wage in the seventies in California.

Now, even before the run up, the multiple was more like 3x, and post real estate boom, the muliple here is more like 5x your annual salary to buy a house. Given this large discrepency in income vs real estate, is it no wonder there is a widening gap between the rich & poor?

Answer #1

Remember mortgage burning parties? When people paid off their mortgage they burned the note and threw a party. Now hardly anyone pays off their mortgage; they just keep refinancing and pay toward their house until the day they die.

A few years ago I got curious about wages and prices. I discovered that since I was born wages went up 4 times but the cost of living went up 6 times. Today we have to earn 50% more to have the same standard of living that people did when I was born.

My dad bought a big house in the country and paid off his home before he turned 30. He raised 3 kids and we had things like snomobiles, go-karts, and motorcycles. He worked at a time when a good employee for a good comapny didn’t have to fear for loosing their job. He now enjoys a comfortable retirement. He did all of this with a high school diploma and a willingness to work hard.

I have a college degree and I’m at the top of my flied but in a lot of ways I’m worse off than my dad. My dad retired at 60 but I’m not sure I’ll be able to by 70. I have a good job but should a corporate bean counter decide that they can save a few bucks I might be downsized or my job outsourced to another country. I’m older than my dad was when he paid of fhis house note but the bank owns most of my house. I’m only raising one daughter but I can’t even afford all the things my dad bought for me and my brothers when we were kids.

They say that my generation (late baby boomers) will be the first generation that will be worse off than the last. Things continue to get worse. I worked my way through college working in book stores, restaurants, and temping. Today these jobs pay about the same as they did when I did them decades ago but the cost of everything else has gone up. I worked my way through college on low wage jobs but my neice can hardly make rent doing the same kinds of jobs. She already has a huge debt from her student loans and her degree hasn’t helped her find a better job than someone fresh out of high school could get.

To avoid being house poor buyers should buy a house about 2.5 times their salary. In some markets this is impossible for middle income earners though.

Answer #2

I don’t even know where to begin… The cost of buying a house has gone up, the gas is rediculous, and now groceries tooo. This country is going nowhere really fast… I am constantly wishing that I was born back when my grandparents were born, then I would be dead now or almost dead… I hate to sound so negative, but whatever happend to a man being able to go get a factory job and being able to support his whole family on that income. And what happend to women working only if they really wanted too, but were able to stay home and raise their children if that is what they wanted. Now, regardless of what most women want for their children, it is a 2 income society. Women are now forced to abandon their responsibilieties as a mother and a home maker and forced to work to help their husbands, whom are also now underpaid, to pay bills and put food on the damn table. Land of Opportunity, I think not, maybe it was… a lonnng time ago, but not anymore. Our children are being raised by schools and day care programs, they aren’t being taught anything about family values and structure… They see their parents for maybe a couple of hours at night monday through friday and if they are lucky may get to spend one weekend day with them (that’s if the father hasn’t taken on a second job to make up for the increase in the cost of living)… I hope and pray that this country will start to get better, but I fear that when my 9 year old boy and my 4 month old little girl are grown, well, let’s just say, I don’t even want to think about what they are going to have to go through to simply put food on the table to feed my grandchildren. Somethings got to give here… I just don’t know what or when it is going to be.

More Like This
Ask an advisor one-on-one!

Semper Partners Real Estate

Real Estate Investment, Financial Intermediary, Commercial Real Estate


VP Capital Lending | Real Est...

Real Estate Financing, Investment Lending, Property Loans


Real Business Savings

Finance, Business Services, Savings


Expense on Demand

Expense Management, Financial Services, Software


New York Estate Planning Law ...

Estate Planning Law, Probate Law, Trusts and Wills