interesting lecture on income/consumption over the last 30 years

[clifp]

On home size from the Census 616 page report on housing. Rough number of house at particular size as of 2005 (the latest available)

Sq ft million of units
< 1000 8.8
1000-1500 20.3
1500-1999 19.5
2000-2499 13.5
2500-2999 7.0
3,000-3999 6.4
4000+ 4.2

Now the actually data of average/median size is probably buried in the 600 pages I didn't look at. Eyeballing the numbers the median size looks like it some where around 1800 square feet, and the mean is clearly well over 2000. Note this includes vacation homes and mobile homes so understates the size of primary residence.

I think the existence of 10+ million homes greater than 3000' shows that McMansion aren't just limited on the rich coastal cities.

As for the average age of the houses, I invite anyone to pore through the data. I simply note that the well reported nesting trending, the explosive growth of DIY home builders store like Home Depot, and Lowes, genetriciation, the numerous stories of flippers buying homes renovating them and then selling them, and the dramatic increases in Real home prices all point to pretty much one conclusion. Americans over the last 10+ years have invested dramatically in housing, the result is we live in bigger, and better and more expensive houses.

Now I am not sure we came first the bigger houses, and then filling them with stuff or the more stuff caused us to buy bigger house. (I suspect the later since there is also an large increase in storage rental usage in the US).

You couple the increase in home quality with record levels of home ownerships I think that wife going to work has resulted in some real benefits to the middle class.

Ladelfina, while you are right that suburbanization of America has moved many costs to the consumers. I think you are forgetting people still have choices there 140,000 convenience stories in the US pretty much all of which sell milk and bread and many of which are within walking distance. I think people are pretty rational and if the need just milk or bread that go to a 7-11 and more than that than the go to a Costco/Walmart. I know a fair number of people without cars and they figure out someway of getting to Costco in Hawaii a couple of times a month.

1.) "material prosperity" is not real if it is simply a function of debt

I disagree. If I had 6 months to live and had no money or heirs, I'd get me a pile of credit cards and live like a king. My prosperity, first class travel, renting Porsche's, and 5* restaurants would be quite real to me. Of course it wouldn't be sustainable, and wouldn't finding out the doctors made a mistake be a mixed blessing!


One thing I did find thought provoking on her speech, was the wholesales adoption that you need to go to college to have a middle class live style. My initial reaction was I wish everybody didn't buy into the college trap, cause I think a lot of kids should do something else like a learn a trade, rather than study liberal arts they don't care about. After some reflection, I think parents are right, in increasingly global economy, American will need to be better/smarter workers to continue to live in house 3x as large as the British!.

So while my pessimistic sides find the leverage of the typical middle class family pretty terrifying, the optimist in me, notes that at least a large chunk of the leverage is invested in improved houses which acts as saving for most America (a bit naively IMO), and education of future generations.

I think much of the board probably shares my belief
Two ways be rich; earn more or desire less... (from my favorite T shirt)

 

[HFWR]

Just following instructions T Al...

Notice it says "Retain This Record"

DW has already intervened in most of my collection of valuable data.

I recently shredded 20 years worth of [-]****[/-] important documents...

I believe humans will have to adjust and adapt to a future with more competition for resources. One way or another...

 

[old woman]

I remember the 70s, I don't have kids so I will use my little brother as an example. He was married 1968 had babies 1969 and 1972. He was in the Navy until 1974 when he moved his family home. His house was a nice older 3 bedroom one bath with a basement and cost 227 a month. His kids played little league or soccer or took swimming lessons or cub scouts or something but not all at once. The kids got new clothes for back to school and a few for spring/summer and had little toys in a room in the basement. They heated with the wood stove insert, cut and split the wood themselves he had an old truck he paid 200 for from his FIL and a car that barely ran. His wife canned and froze food and if they could afford it they would get a side of beef. Vacations were camping trips in tents. They had a tv and stereo but nothing fancy.
Now they have grandchildren 12 and 9. The kids have electronic toys like the Wii and they take trips to places like Disneyland or Hawaii for vacations. Their house is old and only 2 real bedrooms and 2 baths so the boy sleeps in the basement in an area that isn't a real room. But the house is waterfront so they have a nice beach. They own two other houses and 3 business locations so are much better off than either set of parents.

 

[W2R]

On home size from the Census 616 page report on housing. Rough number of house at particular size as of 2005 (the latest available)

Sq ft million of units
< 1000 8.8
1000-1500 20.3
1500-1999 19.5
2000-2499 13.5
2500-2999 7.0
3,000-3999 6.4
4000+ 4.2

Now the actually data of average/median size is probably buried in the 600 pages I didn't look at. Eyeballing the numbers the median size looks like it some where around 1800 square feet, and the mean is clearly well over 2000. Note this includes vacation homes and mobile homes so understates the size of primary residence.

Clifp, thanks!!! I looked through the document and it says that the median size is 1758 square feet (so your estimate was good!), with median lot size of 0.36 acres, median value of $165,344, and median year of construction was 1964. (The median size of new homes is 2258 square feet.) These are Census 2000 numbers. All this is on p. 4, Table 1A-3, and p. 10, Table 1A-7.

A median size of 1758 square feet is larger than I had thought, but nowhere near McMansion size.

 

[OAG]

I recently shredded 20 years worth of [-]****[/-] important documents...

I believe humans will have to adjust and adapt to a future with more competition for resources. One way or another...

Get rid of all records (minor exceptions like personal documents or needed for filing tax returns) older than a month. That way later you can make up numbers for expenses and/or income in arguments. You can embellish away and you can not even prove it to yourself.

 

[RetiredGypsy]

Brilliant, but wrong. I took a look at prices in Riverside, San Bernadino, and Ontario -- the armpits of SoCal. Prices trippled from 1997-2006. I somehow doubt it was due to their great school districts.

Now there absolutley is a correlation between higher home prices and quality of education. But that was certainly true in the 1970's as well.

Our SoCal family had members in schools in both Riverside and Beverly Hills. Believe me, the differences were striking in the 1970's.

San Diego, the quality of education here is horrible, from K-12. I went to one elementary school, two junior-high schools, and two high schools (Navy brat with a weird inter-city moving thing going on). From middle class to upper-middle class. My brother went through a couple different ones, again here in San Diego. 15-20 years ago houses here were cheap, I mean cheap by outside-California standards. Housing has skyrocketed, quadrrupling or sextupaling (is that even a word?) in even the crappy neighborhoods. The quality of education has, if anything, dropped.

One thing I find interesting is that the price of car cost reduction at -24%. I find that one hard to swallow. My grandparents owned cars starting in the 50's with...almost got on a car tangent there; could have gone on for hours, and the list of cars they had was impressive because they could pay their cars off within a couple years. Same for my parents, they paid off their older vehicles within 3 or so years. No one in my family was rich, at points barely even middle class. Now, car payments can go on for close enough to a decade to make me sick. 7-year finance options aren't rare. Of course they have to keep cars longer, they'd lose thousands of dollars ontop of what they just paid for it trying to sell it a couple years after they paid it off. Do that enough and it's suicide. They had this problem in the '70s? O0

 

[barbarus]

Families want to "move up" in housing because they want to get their kids into good school districts in the suburbs.


becomes less educated, less able to compete with foreign countries who value education, i.e. support it with taxes, the way we do not. Maybe we already are but the fog of denial is so thick we can't see it.

Oldbabe, while you are quite correct about the desire for good schools, this impetus pales in comparison to the desire to show off, to lord it over others.

As far as a good education, only parents will be deluded enough to think this will mean much going forward.
A good education will be like a lottery ticket. A necessity to win but an almost assured loss for most.

And yes, it is sad for our society.

 

[laurence]

San Diego, the quality of education here is horrible, from K-12. I went to one elementary school, two junior-high schools, and two high schools (Navy brat with a weird inter-city moving thing going on). From middle class to upper-middle class. My brother went through a couple different ones, again here in San Diego. 15-20 years ago houses here were cheap, I mean cheap by outside-California standards. Housing has skyrocketed, quadrrupling or sextupaling (is that even a word?) in even the crappy neighborhoods. The quality of education has, if anything, dropped.

One thing I find interesting is that the price of car cost reduction at -24%. I find that one hard to swallow. My grandparents owned cars starting in the 50's with...almost got on a car tangent there; could have gone on for hours, and the list of cars they had was impressive because they could pay their cars off within a couple years. Same for my parents, they paid off their older vehicles within 3 or so years. No one in my family was rich, at points barely even middle class. Now, car payments can go on for close enough to a decade to make me sick. 7-year finance options aren't rare. Of course they have to keep cars longer, they'd lose thousands of dollars ontop of what they just paid for it trying to sell it a couple years after they paid it off. Do that enough and it's suicide. They had this problem in the '70s? O0

Have to disagree here, live in San Diego, lots of siblings/wife/siblings of wife educated in public schools here. I think they are very good. Alma Maters for family include Columbia, Cal, UCLA, UCSD, San Diego State, Boston University, etc. - all achieved through public school. Lots of schools in the county listed in the top 500 nationwide. My daughter is in an excellent special needs program and is really thriving in it. I'm sorry your experience was unsatisfactory.

 

[NinjaPigeon]

Plus, if you live in a large metropolitan area... lower cost housing is often in an area of town where you would not want to live (safety reasons) or out so far that the commute is a killer.

This is very much true in Atlanta. Even on a fairly decent salary, I'm still not sure how people can afford to live in these homes. Either everyone else in the city is making 200k (DINKs maybe), or I'm missing something

 

[NinjaPigeon]

Seems to me that this housing crisis is a partial solution to the lack of affordable housing facing the middle class.

A few more years of this and that 76% increase in housing will be wiped away.

New families will find the median home much more affordable.

That's why I'm still sitting on the sidelines I'm hoping in another 3 years I can actually afford to buy a home that is within reasonable distance of the city and where I'm not likely to get shot.

 

[laurinsane]

and yet here we sit with our SUVs and cell phones and high speed internet

I totally agree with some of that facts presented in the article, i.e. mortgage increase and health insurance increases. Those definately take their toll on the middle class.

But then I also take a look at someone like myself - middle class. I don't drive a fancy gas guzzler. I don't pay for cable. I don't go out to fancy restaraunts, or eat out a lot for that matter. I don't have a lot of fancy ammenities like my peers, but some how I can pay my bills every month, and still sock away about 17-20% of what I make a year on a $50k salary. This is a lot more than some of my friends who live in double income households can do.

I swear its the whole keeping up with the Joneses that's doing everyone in and creditcard debt. Of course not everyone can survive a vacation with an all inclusive resort like I can. I think a lot of people feel entitled to things that they don't really need.

 

[TromboneAl]

I don't drive a fancy gas guzzler. I don't pay for cable. I don't go out to fancy restaraunts, or eat out a lot for that matter. I don't have a lot of fancy ammenities...

Right. Amy Dacyzyn wrote The Tightwad Gazette partly because so many news stories said that people couldn't make ends meet, and she wanted to prove that it was possible.

 

[Notmuchlonger]

Get rid of all records (minor exceptions like personal documents or needed for filing tax returns) older than a month. That way later you can make up numbers for expenses and/or income in arguments. You can embellish away and you can not even prove it to yourself.

Ha! That is good thinking RWood! That way I can use ignorance as my defense..er wait nevermind

 

[JustCurious]

Seems to me that this housing crisis is a partial solution to the lack of affordable housing facing the middle class.

A few more years of this and that 76% increase in housing will be wiped away.

New families will find the median home much more affordable.

I wholeheartedly agree. We are watching the market correct itself right in front of our eyes.

 

[ladelfina]

R. L. Polk & Co. Reports Vehicle Age In U.S. On The Rise

Median age for passenger cars remains at a record high of 9.2 years for second year in a row

The total truck scrappage rate of 4.8 percent is the lowest since 1996

R. L. Polk & Co.

Again.. perhaps the "new SUV in every driveway" consumption myth is overblown?
More than 1/2 the cars on the road in the US the last couple of years are over 9 years old..?? See, now I would never have guessed that!

 

[laurence]

And they are all parked on my street! Seriously, the low resale value makes all my neighbors keep their cars rather than trade them in. My neighbor on the corner has a van, a mini cooper, and two F-150's, and it's just him and his wife! But he couldn't part with the late 90's F-150 because they offered him almost nothing, and it's still in great shape. I guess the maintenance, registration and insurance didn't factor in.

 

[ladelfina]

And they are all parked on my street!

 

[Johnphx]

Here's an intersesting article about the kinds of people who aspired to the middle class, probably hoping to give their kids a better shot, moving their kids from urban areas to a new development in Arizona called Maricopa but ended up worse off, IMHO.
Calculated Risk

The upshot is that the developers of Maricopa didn't build a high school and there's absolutely nothing for teenagers to do except get a after school job at the supermarket which has become their hangout.

Looks like Ladelfina beat me to it. She posted this article link in "Other Topics" with a good summary. Great minds think alike!

This is me and my wife. We bought our first home out here in Maricopa (the city, which is in Pinal and NOT Maricopa County actually) in Oct of 2005. We didn't buy anything insanely fancy (1684 sq, 3 bd, 2ba, 0.11 acre lot) for $233k. If I use the prices for the (now) bank owned properties on my block my house is worth about $140k (and that might be optimistic). I don't figure I can possibly recover from that deficit (I owe $207k now).

That means that IF houses out here stopped deflating right now and started inflating at about 3% annually it will take 17 YEARS to get back to my original purchase price (not including inflation, since if I only appreciate at the rate of inflation from here on out I can't get that back). And I think we might even have a little further to fall before this is over.

Edit: OMG - I just read the article (I had to dig through the older ones to find it), I am not sure I could be much more depressed now.

In April 2006, Fox closed on a three-bedroom home in one of the biggest developments in town, Rancho El Dorado...The price had dipped to $212,000,.... I called Daryl Fox in March [2008], when I was back in New York. He told me his house was still on the market — now for $135,000 — and he still had not received a single offer...a foreclosed house on his block was on the market for $99,000.

 

[Johnphx]

At some point, people are going to do what the banks would do. They are going to begin looking at this as a purely financial transaction and begin walking away in ernest. Banks are being allowed to write these losses off. Are taxpayers allowed to write down depreciation on a primary residence?

It will take FAR less time for ones credit to be fixed then it will to get right on these loans.

 

[clifp]

This is me and my wife. We bought our first home out here in Maricopa (the city, which is in Pinal and NOT Maricopa County actually) in Oct of 2005. We didn't buy anything insanely fancy (1684 sq, 3 bd, 2ba, 0.11 acre lot) for $233k. If I use the prices for the (now) bank owned properties on my block my house is worth about $140k (and that might be optimistic). I don't figure I can possibly recover from that deficit (I owe $207k now).

That means that IF houses out here stopped deflating right now and started inflating at about 3% annually it will take 17 YEARS to get back to my original purchase price (not including inflation, since if I only appreciate at the rate of inflation from here on out I can't get that back). And I think we might even have a little further to fall before this is over.

Edit: OMG - I just read the article (I had to dig through the older ones to find it), I am not sure I could be much more depressed now.

John sorry for your misfortune at it look like you put 10% so you were one of the 100% down people.

The only good news is that in my experience after living in CA for ~40 years, it is very rare for California Real Estate to appreciate at 3%. Far more typical is it for go up 5-8% for a few years followed a 2 year bubble of +15%/year, followed by a drop of 0-20% for a couple of year. To make it even more maddening unpredictable some areas in CA can be going up while others go down.

Not saying that your house will go from $100 or $140K back to $240K in a couple of years but less than 10 years seem pretty likely at 5-7 years not impossible. Hawaii suffered a similar problem when the Japanese economy collapse Hawaii house were depressed for almost a decade and then tripled in price.

 

[Johnphx]

The fact that I could rent this place at half of what my mortgage is (and I wouldn't be paying maintenance, so less than half overall) saddens me. But the second worst part is that because I am so far upside down I cannot refinance (not cash out, just refi the remaining balance) to lower my payments.

When you sit down and think about it, its kinda nuts. My wife and I are prime borrowers (credit scores in the low 800's) and our current PITI payment is right at 20% of gross. Were I able to obtain refinancing my payment would drop by 22% and my new payment would be only 15% of my gross. That means I am MORE qualified then I was when they made the original loan.

Not saying that your house will go from $100 or $140K back to $240K in a couple of years but less than 10 years seem pretty likely...

If my house is worth $120k (splitting the difference based on the article), then my house has to essentially double to get back to even. In order to do that requires greater than 7% appreciation per year over the coming decade. I don't know ANYONE who thinks that is going to happen.

My wife and I are in our early/mid 30's. Our incomes should continue to rise over the next 20 or so years and we have many years left to continue to save and invest. But one has to wonder whats going to happen to the multitudes of retirees who bought in the last couple of years and whose primary retirement vehicle was their home equity.

There is a HUGE 55+ retirement community a couple of blocks from me. Imagine being one of those seniors and watching your single greatest asset become an albatross around your neck.

 

[kcowan]

There is a HUGE 55+ retirement community a couple of blocks from me. Imagine being one of those seniors and watching your single greatest asset become an albatross around your neck.

I suspect that most retiress have no mortgage so this does not matter. Being concerned about house values is like watching your portfolio value daily.

 

[Johnphx]

I suspect that most retiress have no mortgage so this does not matter. Being concerned about house values is like watching your portfolio value daily.

I admit I got beaten by the market. But at least in a 401k/IRA when the market dips or go through turbulent times, one can average down and increase profits when better times resume. With my home I can't do that.

Once the correction was underway, I think 10-20% was expected and is in line with a recommended downpayment so that one can retain equity during such corrections. But 50% over two years took me (and alot of others I imagine) by surprise.

 

[volga]

John:

Have you reviewed this option:

Should You Walk Away? - Educate Yourself On Your Rights If You Face Foreclosure. Our Website Can Help You.


Some one in this situation could first buy a home that is similarly lowered in value (but priced at about what you can qualify for), say in Scottsdale or NE PHX before sending in the jingle mail and the resulting hit to ones credit score. I know you never would do this type of thing.

 

[Johnphx]

Does anyone think that allowing people to take depreciation as a write down on their taxes would encourage at least some people to stay in their homes (presumably those with the ability to pay anyways) versus just walking away and taking the credit hit and rebuilding later?

That's what the banks are doing anyways, taking an "investment" loss on the home and then reselling it. If the government wants to continue to encourage home ownership (like the deduction of mortgage interest and the capital gains exclusion for the first $250 / 500k) then this would be in that continued pattern.

It would provide a safety net. If I invest in stocks and make a bad bet then I get to write down the loss as an investor on my taxes. Why not a home, the single biggest investment for most Americans.