Obviously I'm only in one small market, but the above post about inflating property prices makes me curious on something.
I think it is quite clear to everybody the rich are MUCH richer than they were in about 1980, while the average person is, for arguments sake, approximately the same.
I did some quick calculations the other day, and at least in the countryside around here, while land prices appear absurd (after all, my parents purchased 10 wooded acres plus a large house with unfinished basement for $80,000 in 1987. The same would run around say $450,000 today...only 32 years later), many seem to completely ignore the interest rates.
So while the house now costs 5.6 times more, you will likely be able to lock in at about 4% interest now, vs the approximately 10.75% rates in 1987.
So what does that actually mean for somebody who puts say 10% down on a house?
1987 equals a 72,000 mortgage with a monthly payment of $672. Total home cost of $249,920.
2019 equals a 405,000 mortgage with a monthly payment of $1,934. Total home cost of $741,240.
So really, in 32 years, the home costs 2.96 times as much.
This equates to approximately 3% inflation per year.
Is this higher than the inflation figures used to determine the average person is about the same now as 30 years ago? Yea, a little. But it also ignores all of the improvements in a home now compared to one built in 1987. The $450k will get you beautiful wood floors, granite counter tops, etc etc etc.
It got my parents vinyl floors, fake counter top, etc.
Like I said...this is in MY area or Minnesota so may not be applicable to all, I just found it interesting.
Money can't buy happiness. Just video games, which make me happy.
