4 ms·

You really need to look at your salary as how many years does it take to buy an average house in your area. It makes your 6 figure salary look a lot less if you

You really need to look at your salary as how many years does it take to buy an average house in your area. It makes your 6 figure salary look a lot less if you look to the past. My parents bought a $150k house in the 80's when they had a combined income of $50k. That's only 3x annual income to house. That same house is probably going for $500k now. I'd say a family in that area might have a combined income of $100k now. That means the house costs 5x the annual income to house now. This trend is not great. Inflation is the silent tax that working folks need to deal with everyday.

linuxftw 5y ago
In 1985, the average 30 year mortgage interest rate was 13.5%. A $150k house paid off exactly on time would have cost $618k total. This would also be a 41% debt to income ratio for a $50k income. A $500k house today with a 30 year mortgage at 2.5% paid off on time will have paid $711k total. With only a $75k salary, this would be a 31% DTI. Granted, taxes an insurance are going to be more now than they were then, but housing doesn't seem significantly more expensive.
- endisneigh 5y ago
  doesn't seem like a great comparison as you can refinance.
  - SmellTheGlove 5y ago
    In 1985 you weren't going to refinance to 2.5%. It's a valid comparison at two points in time, I think.
    - endisneigh 5y ago
      the point is that even after just 10 years you could've changed your interest rate to be just a third. If you take the lowest possible interest rates for each year in the 30 year period it would be much closer to the rate now than the rate then.
      - jjav 5y ago
        > > In 1985, the average 30 year mortgage interest rate was 13.5%. > the point is that even after just 10 years you could've changed your interest rate to be just a third. That is not true. A third of 13.5% would be 4.5%. Mortgage interest didn't dip to those levels until around 2011-2012, by the time that 1985 mortgage would've just about paid off. Ten years after 1985 interest was still around 7.8% OP makes a great point in that one can't compare the price of a home from the past without looking at what the monthly payment would've been given the (often very high) interest rates of the time.

linuxftw 5y ago

In 1985, the average 30 year mortgage interest rate was 13.5%. A $150k house paid off exactly on time would have cost $618k total. This would also be a 41% debt to income ratio for a $50k income. A $500k house today with a 30 year mortgage at 2.5% paid off on time will have paid $711k total. With only a $75k salary, this would be a 31% DTI. Granted, taxes an insurance are going to be more now than they were then, but housing doesn't seem significantly more expensive.

endisneigh 5y ago
doesn't seem like a great comparison as you can refinance.
- SmellTheGlove 5y ago
  In 1985 you weren't going to refinance to 2.5%. It's a valid comparison at two points in time, I think.
  - endisneigh 5y ago
    the point is that even after just 10 years you could've changed your interest rate to be just a third. If you take the lowest possible interest rates for each year in the 30 year period it would be much closer to the rate now than the rate then.
    - jjav 5y ago
      > > In 1985, the average 30 year mortgage interest rate was 13.5%. > the point is that even after just 10 years you could've changed your interest rate to be just a third. That is not true. A third of 13.5% would be 4.5%. Mortgage interest didn't dip to those levels until around 2011-2012, by the time that 1985 mortgage would've just about paid off. Ten years after 1985 interest was still around 7.8% OP makes a great point in that one can't compare the price of a home from the past without looking at what the monthly payment would've been given the (often very high) interest rates of the time.