I think the important numbers here are the salary and housing cost ones. In 1970 the average house could be purchased for less than 2 years of salary. Today it costs 5.8 years of salary. The cost of housing has sky rocketed relative to income. Housing is the largest bill for the vast majority of people and it eats a massive portion of their take home. Likewise the cost of a vehicle has seen a very large increase percentage wise and very often transportation is the 2nd or 3rd largest cost for a family. So if housing and transportation costs are vastly more expensive then its stands to reason that financial pressure has increased proportionally on most people reducing quality of life. Arguments about 'having cell phones' means we are better off now make no sense. Another thing to consider with that argument is all of those cell phones are built in China where most manufacturing jobs have fled leading to the collapse of an industry that used to fuel the middle class and could comfortably provide a living and sense of pride for so many people.

>think the important numbers here are the salary and housing cost ones. In 1970 the average house could be purchased for less than 2 years of salary. Today it costs 5.8 years of salary.

But no one pays cash for their house. They get a mortgage and so the monthly mortgage payment is (mostly) what matters. Back in the 70s you're paying 10%+ on your mortgage while today it's more like 3.

That is true, but somehow elides the reality that even if interest rates were zero, you would still end up having to "divert" 5.8 years of median salary to own a median house in 2021, which has significant implications for lots of other aspects of life, particularly but not limited to retirement.

But, again, you're using purchase price which is not how people buy homes. For $100,000 borrowed that's $422 a month at 3% and and $1,264 at 15%. Mortgage payments as a % of income are at historic lows:

https://fred.stlouisfed.org/series/MDSP

This is an unusually good time to be a home owner. You can borrow at near 0 or even slightly negative real interest rates and buy an asset that is almost guaranteed to hold/increase in value.

Come on. I just purchased my first home in my late 20s and I am one of the very few in my circle to do it. To suggest anyone has a 400 dollar mortgage payment is just ridiculous and untrue. MY rate is 2.78%. I pay $1000 and thats on the very cheap side for where I live. Average is 1700 and up(I live in an isolated area, but an extremely dense/populated state)

Your comment seems disingenuous. You're also discounting the fact that you need a large downpayment (10,000+) to even get a mortgage in the first place. Do you not live in the USA? Housing prices are a real problem for my generation.

But again, you're missing the point.

People live in homes for their entire lives. If they decide to be owners rather than renters, over the course of their life (actually, typically somewhat less than their whole lives) they will end up mortgage free. This is an important component of most people's retirement planning, in fact.

What's the cost to get to that point? It used to 2x annual salary, it's now nearly 6x annual salary. That's 4 full years of earnings which vanish into owning a home. If you do not reverse mortgage or sell during retirement, you effectively "lose" this money.

>What's the cost to get to that point? It used to 2x annual salary, it's now nearly 6x annual salary.

It's just not. You're not accounting for the interest paid over 30 years of a mortgage.

No, I'm assuming best case: zero interest.

You might be arguing that 1970's cost-as-multiple-of-earnings plus 1970-accumulated-interest exceeds 2020's equivalent. Is that your point?

That "best-case" is unrealistically favorable to the 1970s buyer. In 2020, you can almost get that zero interest mortgage. In the 1970s, you are going to be paying at least 10% on top of that.

Sure, but the same inflation that was driving up mortgage rates was also reducing the real value of the balance of the loan. You can't just look at rates here.

We're talking about affordability here. And my point is that to determine if something is affordable you have to look at monthly payment and not the purchase price.

By that measure you also have to take into account that while you are renting to save up for the down payment you are paying a rent much greater in proportioning to your income. You are making a car payment much greater in proportion to your income. You also very likely are paying a student loan payment that did not exist for the 1970 home buyer. It is much more difficult to save up for even the down payment and more difficult to get approved for a home loan because you already have significant debt which the 1970 home buyer did not. In totality the debt driven economy makes homes less affordable…it’s not just about a monthly payment.

OK, sure. But inflation has an effect on the monthly payment as well. Assuming stagnant real wages (pay raises pace inflation exactly) if inflation is at 7% but you're paying 10% interest, by the end of a 30-year loan your fixed payment is effectively 8x smaller in real terms than it was at the start of the loan.

In other words, in that environment it was feasible to stretch to buy a home even at a high interest rate, because you knew that every year your fixed payment would decrease significantly as a share of your income.

Sure, because no one has 5.8 years of cash on hand, its almost an impossible target for most. 2 years of cash is possible though. Even the ability to put down 6 months of cash would have a massive impact on a loan for 2x your salary and not so much on a loan for ~6x salary.

Not paying attention to the total and only focusing on the monthly payment is how most people get into future crushing debt and very much not a good thing.

The reason rates were so high was because of interest. Back then you could expect your income to increase so the interest wasn't as bad as the nominal rate.

27 years to save for a deposit for a house in Auckland

>there is the elephant in the room of college loans which were essentially non-existent in 1970, but have indebted 10s of millions of kids

Also, health care/insurance costs. Growing up as a kid in the 1970s/1980s in a blue collar household, my father's job provided health insurance at a far lower % of salary than is common today and with minimal out of pocket costs for receiving care. Also, retirement. Back then most companies provided defined benefit (pension) plans rather than defined contribution (401K) plans - you put in your years and then you retired at a decent % of final salary for life.

I have a circa 1970 car, and a modern car. The 1970 car is very cheaply built, and is mechanically simple. The quality, complexity, and sheer number of parts of a modern car has increased enormously. Much of that is due to regulation, most every aspect of a car is heavily regulated today. None of this comes for free.

I'm going to go out on a limb and suggest the reasons the modern car has more parts and is not mechanically simple is not the boogeyman of regulations (although I suppose it could have caused some things like say seat belt alerts and airbags) but rather feature creep in the automotive industry, and computerization of everything.

This is a clear example of regulation making cars more complex! In the 70s, there were no crumple zones, airbags, backup cameras, traction control, lighting intensity requirements, or a whole host of other things that are mandated today. Those things do cost money.

That said, this is also a clear shift in consumer demand too - a 1970s $3500 car is going to be a sedan, small, and pretty featureless. Compare that to a $20k Corolla today - which is the same proportion of median income that the $3500 car was in the 70s. It's larger, more reliable, safer, and has a whole bunch more features.

The people who dislike something will see it everywhere and blame it for everything. Regulation especially is very versatile as a scapegoat.

Cars are much more reliable now than they were in the 1970s, and they can drive more miles.

They have to because services are distributed and it's super expensive and disruptive to sell an owned-residence.

Do you have any sources for that claim? Anecdotally I believe that to be entirely false, but if there are studies you’ve read that back you up I’d love to read them.

Here is one JD Power survey although you'd probably have to dig to find numbers over a longer period of time.

In my experience, it's clearly true overall. In the 1970s, say, you're probably looking at a car in the snow belt lasting 5 years because of rust and 100,000 miles was generally considered very high mileage.

That's because the majority of cars bought in the snow belt during the 70's were American made, and US car quality was terrible during this period.

My family tended to have European cars and they were just as bad.

An example of this is the change to automatic transmission from manual has increased costs. People could have voted with their dollars but manual is (unfortunately) on its way out in America. In a way, they have as it seems vast majority of people buying new cars want automatic but the segment who prefer manual were unable to convince others to buy manual.

This also came with a caveat as automatic is more expensive to manufacture and repair.

I mean it’s just not something most people find appealing. Shifting gears. I’d rather have the car handle that.

What is the pro of manual transmission? I used to have those cars in the EU and thought it was just an annoying extra thing I have to pay attention to when driving.

> What is the pro of manual transmission?

1. enjoyment

2. keeps you awake

3. more reliable

4. more control in stuck or slippery conditions

5. thieves don't know how to drive them

6. the kids are terrified of it and won't ask to borrow it

7. can push start the car

8. can restart the car while moving if the engine stalls

9. can coast

10. can drop the clutch and get off the line faster when drag racing against some teen at the traffic light

11. get to enjoy double clutching and mastering heel-toeing and pretending you're an F1 driver

12. The Cat cannot reach the clutch pedal, frustrating its plans for putting me in the trunk and depositing me in the Kat Fud Factory

13. you can nurse the car home and to the shop with a broken gearbox. With an automatic, it's a tow truck every time

14. the sheer joy of a winding mountain road, a powerful V8, picking the gear for the next turn, managing the traction and engine speed, etc.

The main thing is that manufacturing it is cheaper than automatic and thus the cost to buy it is cheaper. In a longer term, it will also save money on repairs being neeeded.

I've paid more to get a stick :-)

Housing is also more heavily regulated today. Various places have different regulations for hurricanes, earthquakes, and other things.

Isn't it possible that the average salary is skewers due to more women entering the work force today than in the past?