Well, let's do the math on that, arbitrarily picking 1974, because that's the year my wife was born:
The median home price was $35,900 in 1974:
https://www.huduser.gov/periodicals/ushmc/winter2001/histdat08.htm
The federal minimum wage was $2.00 an hour.
https://www.dol.gov/agencies/whd/minimum-wage/history
A 10% down on $35,900 was $3,590 or 1,975 hours of minimum wage work. At 40 hours a week, that means 49.375 weeks of work saving every penny. Not a reasonable action since you still have to, you know, LIVE and stuff. But that gives us something to compare with today. The full house would be 17,950 hours of minimum wage work or 448.75 weeks, 8.63 years.
Today, the median home price is $416,900:
https://www.fool.com/money/research/average-house-price-state/
The federal minimum wage is $7.25 an hour.
https://www.dol.gov/general/topic/wages/minimumwage
So that 10% down of $41,690 is now 5,750 hours of minimum wage work. More than double the 1,975 hours it was in 1974. In order for it to be 1,975 hours, the minimum wage would have to be $21.11 per hour.
The full house? 57,503 hours of minimum wage work at $7.25 an hour (1,438 weeks or 27.6 years), again, more than double the 17,950 hours needed to pay off a 1974 house. In order to pay off a $416,900 house in 17,950 hours, the minimum wage would need to be $23.23 per hour.
I think something important missing here from the maths is that taking longer to buy the house makes it astronomically more expensive due to compound interest on your mortgage.
A lower wage means you're more likely to only make minimum payments on your mortgage, and thus spend more money on interest.
On a 30 year mortgage on the average house, 6.73% interest rate (average in 2024), the total repayments come to $996,840, which is 137,500 hours, or 66 years of minimum wage work at 40 hours a week. Sure seems like a problem when that's longer than the term of the mortgage - at minimum wage you can't outpace the mortgage rates
Completing the same calculations with a 30 year mortgage in 1974 gives us a house costing a total of $90,457, or 22 years of minimum wage work. Still a little ridiculous, but doable on 2 incomes.
I still think the key flaw in thinking for 1974 or 2025 is that minimum wage was never intended to be able to purchase a home. Rent an apartment with room-mates? Sure. But nobody earning minimum wage at any point should expect to be able to buy a home. It's literally the minimum.
In 1970 you could rent an apartment for $108.
The federal minumum wage in 1970 was $1.60 an hour.
So at 40 hours a week, you were making $268.80 a month, your rent was 40% of your income. Rule of thumb is 33% so you're over, but still functional. Got a room-mate? 100% doable.
Now the average apartment is $1,378 for a 2 bedroom.
https://www.statista.com/statistics/1063502/average-monthly-apartment-rent-usa/
With the federal minimum wage of $7.25, you're only making $1,218 a month. You're underwater at that point. Rent is 113% your income.
With 2 bedrooms, to get it to 1970 levels, it would have to be rented by 3 people, 3,654 monthly income, rent would be around 37% the combined income.
I think a further thing to point out in this math... is we'd also need to take into account average transportation and food expenses. Because while I'm not smart enough to do the math to calculate it out. On top of say housing relative to income doubling. Prices of necessities also need to be calculated out. If housing costs scaled with wages, but food cost doubled wages, that would still be a large factor on buying power.
Mortgages don't typically involve compound interest, unless you miss payments. In order to actually pay off the mortgage the payment has to be higher the the interest for the same period. It's expensive because borrowing money for 30 years is expensive even at low rates.
it warms my heart everytime i see that i inspired a nerd to comment a whole phone screen of maths 🥲
Do you have math behind this posting? Or is your number randomly generated?
more than double
FYI, that's more than triple.
17,950 * 3 = 53,850 < 57,503
Many questions here.
But what is this 10% down?
Used to be if you didn’t put 20% down, you would have to get PMI, which was an additional monthly charge (though still worth it because that’s way better than paying rent.)
I put just under 8% down on my house and the PMI is negligible. Mortgage is $2,000 a month and IIRC, PMI is like $100. Homeowners insurance is worse, hell, my CAR insurance is worse.
Something that a lot of people get wrong in these calculations.
Life is more expensive these days, and I don’t mean cause the prices are higher.
In the 70s, you didn’t need higher education to do well, now you do.
Not everyone had or needed a TV, now having a phone and internet is kind of critical for day to day life.
Things were closer, it was easier to not own a car.
Getting a job was simpler, you could just walk down a street and try different businesses, now you got many rounds of interviews.
I could keep going, but overall, things just take a lot more effort while people having less and less free time.
There are more people to compete with in these areas.
Yeah in the 50s and 60s the US was still riding the post WWII high. Now a lot of the world has (re)industrialized and so we're all competing against each other.
insane if true
It's actually quite difficult to compare like-for-like.
You can take the average or median price, but then this ignores the fact that as more people move towards the big cities, the average house isn't the same thing as it was in 1970.
The other problem is overlooking interest rates. The 70s and early 80s was an extremely volatile time, with typical mortgage rates hitting over 10%, 15%, and over 20% at various points. Taking out a $12,000 mortgage ran the risk of your monthly repayments shooting up to $200 in interest alone, at a time when minimum wage was $267/month.
So, $66 is probably true for a very particular interpretation, but I'm sure you could just as easily find a way for it to come out as $65 or $67.
None of the above should be read as a defence of capitalism or of landlords, just pointing out some details that often get missed.
Fixed rate mortgages have been standard in the US since the 1930s
Variable rates are still available and common. They tend to be slightly lower rates than fixed rate mortgages due to volatility risks.
I interpreted their remark to be more about the fixed rate though. The $20,000 house could have a 20% fix interest loan.
They did say "shooting up", so maybe they are presuming variable rate mortgages.
That's pretty crazy. I have almost $90 an hour and I can't afford to buy a house either right now.
Edit: although I only about $26/h as my actual salary so that might be why.
I have been living in Philly for a decade now, and in that time, I am not sure I have seen a single new house go up for less than $500k. Everything in the $50k-$300k range has been either an ugly condo or old track housing from the post-WW2 period.
Yeah man it's rough in the city. I also really don't want to live far away, so... 🥲
i could live on $20/hr. we're not the greedy ones.
IIRC from when I looked this up a few years ago, $25/hr would match the inflation adjusted minimum wage from 1952.
If you subscribe to the definition of inflation that assumes renting instead of home ownership and homesteading in rural frontiers with challenging weather (deserts, swamps, tundra) rather than in gentrified places with pleasant weather (e.g. every existing metropolitan area).
The way I see it, unless people somehow shrink in size or a wormhole opens to another Earth-like planet, real estate prices are inversely correlated to population which continues to rise.
nah we want the whole bakery
That logo vaguely looks like a cock and balls
It isn't. Not even close. This says $12 https://www.epi.org/blog/the-value-of-the-federal-minimum-wage-is-at-its-lowest-point-in-66-years/
That's just straight inflation, the meme is talking about housing inflation, which has been higher than monetary inflation.
the post isn't about just correcting the amount for inflation. it's saying this is what you need to match the percentage of the cost of buying a home at the time. the math could still be wrong but they're not talking about the same value.
