Quote:
Originally Posted by Crawford
While I generally agree with the above, the non-coastal metros have also had significant RE increases in recent years and aren't all that cheap anymore.
My brother lives in Metro Detroit, in upper middle class (but not fancy) sprawl. Homes go in 2-3 days, often above asking, and home prices have basically doubled in a decade, so far faster than inflation. Yes, nothing like the Boises and Bozemans of the world, but relative affordability has dropped. He recently sold his home in a weekend, above asking, at a price that would likely require two high earners, or one very high earner.
And, yeah, there are still places with dirt-cheap homes, but they tend to be extremely undesirable with terrible schools, crime and (and rural areas) few jobs. Rural backwaters, inner-city slums and the like.
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Detroit Metro's economy has improved substantially in the last decade from my understanding.
Housing costs have generally increased faster than inflation, partially because cheaper debt, and partially because incomes are higher so people can spend more on housing. House prices are far higher than they were in 2010, but mortgage rates are also much lower. The difference in actual mortgage payments isn't that different.
Housing has probably sucked up much / most productivity gains in the last 2 decades as people don't really need more "things" as much. Productivity gains in the last 20 years have been nothing short of incredible and that is starting from a base of society which already mostly had things in easy abundance.
Housing quality has also increased substantially in the last 20 years, which translates to higher prices. It makes sense that a newly renovated home with granite counters, new appliances, better thermal performance, etc. costs more than what a home built in 1990 with laminated counters, etc. cost. Modern new build homes have high quality finishes with 3,000sf+ selling at relatively affordable pricing.. so yea, that type of housing costs more than a 2,000sf new build with basic finishes that sold in 1980.
Incomes increasing faster than inflation as a result of increased productivity has also lead to faster gains in housing costs, and a lot of that has probably gone to "nothing" via higher land costs, etc.. But also to higher labor costs for construction as wider society gets wealthier. Laborers who work on the houses and create new supply have to get paid more than they did in 1980.. leading them to have higher qualities of life and productivity than they once did.
The overall level of abundance today far exceeds that of the past. It's distribution in society, how society spends that abundance, etc. has also changed substantially though, making direct comparisons of single items difficult. The overall society-wide look of things shows higher wealth than ever before and higher per-capita incomes than ever before though, and there is a lot of truth to that.
The other factor is that a lot of productivity gains have gone to upper incomes, making those in lower income brackets feel like nothing much has changed. Every income bracket is wealthier, but those in the top 20% of incomes have far higher living standards than those incomes did 20 years ago, while those in the top 70% of incomes are more or less continuing a very slow increase of quality of life that doesn't seem as perceptible and which for many can be offset by changing market demands like living in higher cost metro areas, etc.
Of course there is also a whole ton of economic noise, depending on metro markets, local economic conditions, exact financial performance of any given year, etc which can throw noise at these factors.
I do think the big picture of things is still that society is wealthier than it was in the 1960's, or even the 1990's, and not by a small amount. It's just that society is also very different than it was in those years, and that wealth is spread out in substantially different ways.
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