The American Dream Is Now Officially Unaffordable

[randomrogue]

Yeah yeah, because the American Dream (tm) was just handed to past generations.

No one ever suffered through a great depression. Streets were paved with platinum. Jobs (all guaranteed for life) all paid mega-rich wages and no one ever complained about hard work/low pay. There was never anything to derail whatever anyone wanted... like being drafted by your government and sent off in your prime to die 4,000 miles from home, or any such hardships that the current "Most Put-Upon Generation" faces.

Jobs, houses, cars, all the trappings just fell in people's laps.

But somehow, we needed more and more and bigger and bigger and more intrusive government creating larger and larger piles of debt to go from the age when everything was super-awesome...

... to the age where everything supposedly sucks worse than ever.

Now THAT'S progress.

Might be worth noting that the baby boomers (at least the early ones born right after the war) enjoyed a GIANT leap in median income. It almost doubled. Today incomes are stagnant while expenses are rising. If you entered the workforce 20 years ago the median income was $49,429 and today it is $51,017.

Whether we had a draft or a war is irrelevant. We've had wars throughout our history including a bunch today. What matters is income, benefits, and expenses.

 

[Naeeldar]

We actually did not put down 20% on the house. We were going to and skip PMI but there were things we wanted to do to the house first. It worked out, because 2 weeks after we bought the house we found a leak under the slab. We ended up re-plumbing the whole house because we were doing other work and were putting in new tile. Our mortgage is $1897 a month, but once PMI drops its goes to about 1800 a month.

You are right that kids would probably be out of the equation for now. We first started looking for houses for around 170k which is not bad in South FL where we are. After a year of trying to find something, we had more cash and were a little more flexible. We ended up finding our house in an amazing neighborhood in a great community.

We can afford the house we got but expect to start making more in the future and that would allow us to have kids. I bought my car new in 2008 and paid it off, so I wont need a car for a while. So I figure another combined 20k gross and we should be able to afford kids.

There are tradeoffs for sure. We dont drink for the most part or go out all that often and if we do, the night usually cost maybe $50-$70. We take vacations but even then we try and save money. Most expensive trip we took was a cruise that was about 2200 in total.

I definitely understand. I originally had that same decision when I bought a condo almost 5 years ago now. I was making about the same gross and had to make a decision - $160k got me a condo with 2 bed 2 bath condo that was nice and would rent well. However, to get the garage and what I wanted I was looking more like $280k and I also did not have 20% to put down. I went with the lesser condo even though the bank would give me the loan. Wasn't comfortable with the payments and realistically I new I would want a new car even though I had just paid off my 2008 Accord at the time. But then these are lifestyle choices everybody needs to answer for themselves.

That said I know my lifestyle would be impacted big time if I had kids etc... I think that's the big thing about the american dream, we realistically would have insanely tight budgets as soon as kids came along and forget savings. That said median income is around $60,000 household these days so look where that puts most of America.

You are very much middle class. In fact, you're on the upper end of the spectrum. Average household income is around lower fifties. I earn that and as a single earner family we live just fine. Our house is paid off, our cars are paid off (even one 4x4 SUV, although a four seater Chevy Tracker convertible might not qualify), my motorcycle is paid off, in fact we don't owe anyone anything and we live pretty well. I'm living the American dream; you are living the American dream. Those who believe they need $130k per year to live the American dream are either in very expensive areas or suffer from stupidity or bad luck.

It's true in parts of the country but as you said if you live in the northeast or Cali it gets a little tighter. My taxes are dirt cheap at $1,900 a year for a $160,000 condo. If I purchased a house in the area I'd be looking at $240,000 minimum and roughly $3,800 a year. If I purchases a comparable quality house to the condo, I'd be looking at $300,000 alone. And I live in PA - it's worse for people in NJ. Not unusual to be looking at $6,500 a year in taxes with a $300,000 home.

After our company gets sold I may really look at relocating to South/north Carolina or maybe Texas. Home prices are just so much cheaper.

 

[realibrad]

You are very much middle class. In fact, you're on the upper end of the spectrum. Average household income is around lower fifties. I earn that and as a single earner family we live just fine. Our house is paid off, our cars are paid off (even one 4x4 SUV, although a four seater Chevy Tracker convertible might not qualify), my motorcycle is paid off, in fact we don't owe anyone anything and we live pretty well. I'm living the American dream; you are living the American dream. Those who believe they need $130k per year to live the American dream are either in very expensive areas or suffer from stupidity or bad luck.

I feel like a big issue is what people expect from living middle class. I have a mid range gaming computer, car, cellphone, house, inter net and a bunch more. I don't have a 25-30k car, I dont have a large flat screen in every room, I dont have a large leather couch.

Other than my house, I live debt free really. I know plenty of people my age going out every weekend spending hundreds having a good time, but that is the trade off. Its like people think that as a middle class person, you dont have to sacrifice. If we made a combined 130k we would be living quite large for us, and yet we still live quite nice with 60% less.

 

[werepossum]

SNIP
It's true in parts of the country but as you said if you live in the northeast or Cali it gets a little tighter. My taxes are dirt cheap at $1,900 a year for a $160,000 condo. If I purchased a house in the area I'd be looking at $240,000 minimum and roughly $3,800 a year. If I purchases a comparable quality house to the condo, I'd be looking at $300,000 alone. And I live in PA - it's worse for people in NJ. Not unusual to be looking at $6,500 a year in taxes with a $300,000 home.

After our company gets sold I may really look at relocating to South/north Carolina or maybe Texas. Home prices are just so much cheaper.

Yep, it's very location-specific. My uncle sold his house to some retirees from NJ and they said they were getting twice the house for 1/4 the money. (Rural Tennessee though, 2,500 sq ft all brick rancher on two acres versus urban NJ, 1,200 sq ft frame on a postage stamp.) But people in those areas tend to earn more as well. Many of those areas probably need a $15 minimum wage (preferably with exclusions for kids working part time) just so that people can afford to be poor rather than destitute. Even in Tennessee there's a huge difference between Nashville and Bell Buckle or Wartrace or Turtletown - not to mention Blue Goose Bucksnort or Bugtussle. lol

 

[realibrad]

I definitely understand. I originally had that same decision when I bought a condo almost 5 years ago now. I was making about the same gross and had to make a decision - $160k got me a condo with 2 bed 2 bath condo that was nice and would rent well. However, to get the garage and what I wanted I was looking more like $280k and I also did not have 20% to put down. I went with the lesser condo even though the bank would give me the loan. Wasn't comfortable with the payments and realistically I new I would want a new car even though I had just paid off my 2008 Accord at the time. But then these are lifestyle choices everybody needs to answer for themselves.

That said I know my lifestyle would be impacted big time if I had kids etc... I think that's the big thing about the american dream, we realistically would have insanely tight budgets as soon as kids came along and forget savings. That said median income is around $60,000 household these days so look where that puts most of America.



It's true in parts of the country but as you said if you live in the northeast or Cali it gets a little tighter. My taxes are dirt cheap at $1,900 a year for a $160,000 condo. If I purchased a house in the area I'd be looking at $240,000 minimum and roughly $3,800 a year. If I purchases a comparable quality house to the condo, I'd be looking at $300,000 alone. And I live in PA - it's worse for people in NJ. Not unusual to be looking at $6,500 a year in taxes with a $300,000 home.

After our company gets sold I may really look at relocating to South/north Carolina or maybe Texas. Home prices are just so much cheaper.

Its funny. I am now blocked by the OP of this thread, and Engineer for saying that middle class life is easier than most think. The OP I have come to expect to be irrational but even someone like Engineer gets very defensive when I say that middle class is very possible at incomes lower than 130k.

The avg of just about everything we now have is so much better than it used to be.

http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf

 

[werepossum]

I feel like a big issue is what people expect from living middle class. I have a mid range gaming computer, car, cellphone, house, inter net and a bunch more. I don't have a 25-30k car, I dont have a large flat screen in every room, I dont have a large leather couch.

Other than my house, I live debt free really. I know plenty of people my age going out every weekend spending hundreds having a good time, but that is the trade off. Its like people think that as a middle class person, you dont have to sacrifice. If we made a combined 130k we would be living quite large for us, and yet we still live quite nice with 60% less.

Yep, it's mostly expectations and behavior. Very, very few people have so much money that they can buy anything they want without thinking about it. However, if one lives modestly then it's easy to buy what you need without thinking about it.

 

[Naeeldar]

Yep, it's very location-specific. My uncle sold his house to some retirees from NJ and they said they were getting twice the house for 1/4 the money. (Rural Tennessee though, 2,500 sq ft all brick rancher on two acres versus urban NJ, 1,200 sq ft frame on a postage stamp.) But people in those areas tend to earn more as well. Many of those areas probably need a $15 minimum wage (preferably with exclusions for kids working part time) just so that people can afford to be poor rather than destitute. Even in Tennessee there's a huge difference between Nashville and Bell Buckle or Wartrace or Turtletown - not to mention Blue Goose Bucksnort or Bugtussle. lol

It's probably not just minimum wage though it's also across the board. We definitely make more but it's no where near comparable for the housing prices. For example the retirees you gave definitely did not make 8x the amount of money.

Still the good news if for those of us in the northeast - we can retire nicely to other parts of the country. Same for cali people.

Still I'll be looking big time for the ability to work remotely in a few years with my current company. Would even be willing to take a 5-10% salary reduction - well maybe anyway.

On a personal note it makes me sick to think my parents got a house with an inground pool, 1 car garage, 3 bedroom 2.5 bath for for $140,000 in 1990 - my condo in 2009 was 160,000 for less house. Hell they even turned it into a 5 bedroom house for an additional $20,000 a few years later.

income has gone up since then but so has inflation. Definitely hard to live in the northeast now.

 

[Naeeldar]

Its funny. I am now blocked by the OP of this thread, and Engineer for saying that middle class life is easier than most think. The OP I have come to expect to be irrational but even someone like Engineer gets very defensive when I say that middle class is very possible at incomes lower than 130k.

The avg of just about everything we now have is so much better than it used to be.

http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf

Don't get me wrong it's possible but it's FAR harder than it has been for some time. And I'm not talking about things like tv's or cars etc. Although lets be honest cars have gotten dramatically more expensive in terms of income ratios - even for a basic car. For example my father bought a brand new 67 camaro as a teenager by earning money over summer jobs (believe he was 19 at the time). I'd like to see a teenager do that now with even a very modest camaro let alone the V8 model.

My father is upper middle class and is literally putting away a fair amount of money in his retirement for grandkids college because he doesn't want to see the growth of his family stop and he knows as well as his children are doing it's going to be tough for them to provide the same way he did for us. That includes me and at 30 I'm already approaching the income they are talking about for what is needed for middle class - and that without dual income.

I'm doing well but it's far harder out there for many today than it has been in years. It's also not getting any better. And I feel really bad for kids as they graduate college over the next 10 years. I figure sometime in the next 10-15 we will bottom out and improve because thigns will have gotten as bad as they can. Or at least I hope that's what happens.

 

[realibrad]

Don't get me wrong it's possible but it's FAR harder than it has been for some time. And I'm not talking about things like tv's or cars etc. Although lets be honest cars have gotten dramatically more expensive in terms of income ratios - even for a basic car. For example my father bought a brand new 67 camaro as a teenager by earning money over summer jobs (believe he was 19 at the time). I'd like to see a teenager do that now with even a very modest camaro let alone the V8 model.

My father is upper middle class and is literally putting away a fair amount of money in his retirement for grandkids college because he doesn't want to see the growth of his family stop and he knows as well as his children are doing it's going to be tough for them to provide the same way he did for us. That includes me and at 30 I'm already approaching the income they are talking about for what is needed for middle class - and that without dual income.

I'm doing well but it's far harder out there for many today than it has been in years. It's also not getting any better. And I feel really bad for kids as they graduate college over the next 10 years. I figure sometime in the next 10-15 we will bottom out and improve because thigns will have gotten as bad as they can. Or at least I hope that's what happens.

I think a big part of what you are saying is a measurement issue. A car of today vs a car of 1970 relative to income is way more expensive. But, when you realize that a car from 1970 was pretty much an engine on wheels, it changes. The avg car of today has far more to it than the cars of the past. It would be like comparing a cell phone of 2000 to todays smart phones. Both are phones, and if you compare the price of the 2000 phone relative to today then it would seem that phones have gotten more expensive. In reality, what we want has grown far beyond what we used to call a phone. This happens in cars, houses, electronics, and pretty much everything.

The expectation of improvement comes from historical trends, but we forget that things of the past are not really directly comparable. If someone offered me a car that was half the avg price of a car today, but would be comparable to a an avg car of 1970, I dont think I would take it. I expect my money to do a lot more.

 

[Fern]

-snip-
In the
1980s, idiots were inventing terms like EBITDA - Earnings Before Interest, Taxes, Depreciation, and Amortization. If you think about it for two seconds, this metric doesn't make any sense. Why would you choose to ignore things like taxes, depreciation, and amortization? The only reason for doing that is to justify stock prices that are disgustingly expensive when using classic valuation methods involving free cash flow or dividends.

My accounting and finance degrees were earned back in the late 70's and early 80's so I prefer the classical valuation methodologies.

However, that doesn't prevent me from recognizing the value of the EBITDA model:

1. Depreciation. It is possible to have relatively identical businesses whose depreciation numbers are substantially different. Different business choose different depreciation methods and life times for their equipment. Different businesses have grown through different methods of acquisitions. An acquisition structured as an 'asset sale' will typically show far more investment in equip (thus a higher depreciation number) than a stock purchase (no step up in basis here). Thus the inclusion of depreciation will generally impair the accuracy of any financial comparison.

2. Interest costs is another number that is useless for comparison purposes. Whether to use debt or equity to provide capitalization is either a personal choice or one dictated by individual circumstances. Same for interest rates. Neither of those may be relevant to a purchaser/investor. Again, interest costs is removed because it pollutes the financials resulting in a misleading financial comparison.

3. Amortization. See #1 above. Some intangible assets are self created while others are purchased. I.e. two similarly valuable intangibles could show up on the financials at wildly different amounts.

4. Taxes. Different structures result in different tax situation. An S-corp would have zero income taxes on its financials while a C-corp would not, even if the businesses were otherwise identical. In a complicated corporate structure (meaning subsidiaries that will be consolidated for income tax purposes) the income tax for a profitable business one may acquire might be partially or completely offset by tax losses from other subsidiaries or NOL carryforwards etc. Then of course there are different tax planning tactics that may be available (or risked).

In short, these are all removed to enhance financial comparisons of businesses. I find EBITDA particularly useful when comparing different corporations in the same industry.

Also, large acquisitions are usually done by calculating EBITDA and then applying a multiple to determine value (or acquisition price.) In effect, this is similar to a cash flow and RoR calculation.

(Note that depreciation and amortization are non-cash expenses too.)

Fern

 

[Zaap]

Might be worth noting that the baby boomers (at least the early ones born right after the war) enjoyed a GIANT leap in median income.

They also enjoyed coasting along on one of the greatest flukes in world history: China, Russia (USSR) and even large parts of Europe took themselves out of the game after nearly destroying themselves and an entire able-bodied generation in WWII, and/or embracing the utter insanity of FAIL that is communism. The US coasted along for a nice long ride on not really having much competition. But even so, everything wasn't all sweetness and roses- we had our share of some pretty terrible times as well.

Whatever people are referring to as the American Dream has never just been handed to most people. It takes hard work, know-how, drive, effort and all the rest of it.

Now people want to act like we can still keep coasting along as if billions of other people in the world weren't back in the game too- because (as always) we're just so special. So of course special people deserve the "American Dream" as their birthright.

When it turns out to be tough to get, it's: whine, stomp feet, and start getting on knees, smearing on lipstick for whatever politician is going to come along and promise to grant it at someone else's expense.

What exactly is this American Dream anyway? For a lot of people it seems to be turning the country into something closely resembling El Salvador- then whining about being poor.

For others, it's handing politicians more power than ever, bowing and scraping while they blow through more money than the next several generation could ever pay back - then complaining about being spied on and treated like shit- and about being poor.

For me- an American Dream would be about more people making America something anyone would even want to dream about in the first place. Embracing a third world mentality and begging to become that isn't exactly achieving that.

 

[realibrad]

Normal people, doing normal things, are priced out of the market.

Worse yet, they are replaceable.

They are inconsequential.

They don't matter at all.

THAT is SLAVERY.

-John

Do you think being poor is the same as being a slave?

Poor person does not do what their boss says, is fired.

Slave does not do what their boss says, is beaten and or killed.

Poor person wants to quit, and does.

Slave quits and is beaten and or killed.

Poor person works and saves to improve their life.

Slave owns nothing. If caught owning something are beaten and or killed.



Such a massive gap.

 

[Hugo Drax]

So where do my GF and I fall?

Combined income just above 80k gross.
We just bought a 250k house.
She put herself though school.
I am putting myself through school.
I am 27 she is 25.

We live a very comfortable life. If I am not middle class, then I can't wait to get there because life is good.

Neither of us come from wealthy families but we both live better than our parents. I know that I could not live this life without someone splitting the bills, but I'm not even considered middle class and life is good.

Whats your monthly savings after expenses? how many months do you have saved for mortgage payments etc.. in the event of job loss etc?

how much do you have saved in the event of some kind of emergency?

can you keep up mortgage payments etc.. if one person loses their job for 1 year or more?

 

[realibrad]

Whats your monthly savings after expenses? how many months do you have saved for mortgage payments etc.. in the event of job loss etc?

how much do you have saved in the event of some kind of emergency?

can you keep up mortgage payments etc.. if one person loses their job for 1 year or more?

Lol, now you are reminding me of underwriting again.

We try and keep at least 5-6k cash on hand. We also have zero debt outside of our house, so if a big issue happened, we also have CC space to use. We can afford our mortgage payments with one income, but it would require us to cut back for sure. There is also the possibility of an adjustment while unemployed. Our mortgage is around 33% of our net income.

Also, the cash we are keeping on hand is very low right now, because we are upgrading the house quite a bit. Once we redo the kitchen and guest bath, we will probably coast for a while. Kids are in our future and retirement will need to start being invested in. Kids are predicated on future income growth, which is partly why we don't have them now. We are looking for a combined increase of about 20k gross increase in the next 4-5 years to have kids.

We are currently safe with the jobs we currently hold, and in all likelihood will receive more income in the future. By no means are we safe from every possible issue that could happen, but we feel reasonably so, and so did our lender.

 

[dmcowen674]

Originally Posted by realibrad
Its funny. I am now blocked by the OP of this thread, and Engineer for saying that middle class life is easier than most think. The OP I have come to expect to be irrational but even someone like Engineer gets very defensive when I say that middle class is very possible at incomes lower than 130k.

Don't get me wrong it's possible but it's FAR harder than it has been for some time. And I'm not talking about things like tv's or cars etc. Although lets be honest cars have gotten dramatically more expensive in terms of income ratios - even for a basic car. For example my father bought a brand new 67 camaro as a teenager by earning money over summer jobs (believe he was 19 at the time). I'd like to see a teenager do that now with even a very modest camaro let alone the V8 model.

My father is upper middle class and is literally putting away a fair amount of money in his retirement for grandkids college because he doesn't want to see the growth of his family stop and he knows as well as his children are doing it's going to be tough for them to provide the same way he did for us. That includes me and at 30 I'm already approaching the income they are talking about for what is needed for middle class - and that without dual income.

I'm doing well but it's far harder out there for many today than it has been in years. It's also not getting any better. And I feel really bad for kids as they graduate college over the next 10 years. I figure sometime in the next 10-15 we will bottom out and improve because thigns will have gotten as bad as they can. Or at least I hope that's what happens.

You see there is good reason dolts like that silver spooner are on ignore.

They continue spew crap even with articles and history refuting their bullshit.

 

[Engineer]

Brad, bullshit. I've never once been defensive on your bullshit claim of incomes less than $130,000 doesn't equal middle class so stop pulling stuff from your ass. I have never once put a dollar amount on the term 'middle class'. You know damn good and well what my beef is and that's sending out good paying, 'stuff making' middle class jobs and now, bringing in workers on visas because we don't have enough workers (bullshit). Don't go making shit up because I put you on ignore (now if people would stop quoting you, it would be grand).

 

[werepossum]

Brad, bullshit. I've never once been defensive on your bullshit claim of incomes less than $130,000 doesn't equal middle class so stop pulling stuff from your ass. I have never once put a dollar amount on the term 'middle class'. You know damn good and well what my beef is and that's sending out good paying, 'stuff making' middle class jobs and now, bringing in workers on visas because we don't have enough workers (bullshit). Don't go making shit up because I put you on ignore (now if people would stop quoting you, it would be grand).

While I disagree with him on a lot of things including this issue, I find Brad to be a smart young man with well-reasoned opinions. Smart people with opinions other than my own are those I consider most worth reading, personally, as I'm not likely to learn much from my own opinions. But YMMV.

 

[Matt1970]

It's true in parts of the country but as you said if you live in the northeast or Cali it gets a little tighter. My taxes are dirt cheap at $1,900 a year for a $160,000 condo. If I purchased a house in the area I'd be looking at $240,000 minimum and roughly $3,800 a year. If I purchases a comparable quality house to the condo, I'd be looking at $300,000 alone. And I live in PA - it's worse for people in NJ. Not unusual to be looking at $6,500 a year in taxes with a $300,000 home.

.

My girlfriend pays $3500/year on a house assessed at $110K and I pay $2500 on $80K. We also have the highest gas tax at 50 cents/gallon, highest tax on cigarettes and second highest state income tax.

 

[Stewox]

Who decided it official ?

 

[realibrad]

Brad, bullshit. I've never once been defensive on your bullshit claim of incomes less than $130,000 doesn't equal middle class so stop pulling stuff from your ass. I have never once put a dollar amount on the term 'middle class'. You know damn good and well what my beef is and that's sending out good paying, 'stuff making' middle class jobs and now, bringing in workers on visas because we don't have enough workers (bullshit). Don't go making shit up because I put you on ignore (now if people would stop quoting you, it would be grand).

I can understand the confusion and will take the blame for it. You are correct that you have never said explicitly that 130k is the magic number for a middle class life. I will explain what I meant to say in context. The middle class is a moving target. What is today considered middle class is not what was middle class in the past. When people say the term "Middle Class" they dont mean it literally. What ever the middle income is, becomes the middle class. The way I think most people mean it, is a lifestyle of having a house, kids, cars, retirement and the money to have some entertainment.

The issue seems to be a quantification of those things. I linked in a previous post the house size trends from 1970 to today. The home size in the us was 1525 square feet. 2007 the avg house size was 2277 which is pretty close to a 50% increase. To me its not apples to apples when something is that different.

My house under air is 1700 which is still bigger than the avg house of 1970, but it also has many other things that were not avg. This comes from a more productive society. So when I argue that foreign competition is a good thing, this is the type of thing I'm talking about. I believe and can support my claim that a more productive society reducing the cost of things makes people better off. Wages are not the be all end all, when the buying power has increased.

Don't get me wrong, I'm not saying there are not issues, but there is a measurement problem that makes it seem far worse than it is. Life is pretty damn good for me, and I know it.

As for Dave saying that I was born with a silver spoon...
My parents paid for my life up until I was 18. By no means was I poor, but I was not rich either. I had a 20'' color TV in my room. My house had AC and heating. I never went hungry. When I 18, I decided to go live in FL to be with a girl I met online, my dad gave me a 1986 VW Jetta with 250k+ miles on it. That was the only support my dad was able to give me, as he had to support himself as an auto mechanic. Everything I have comes from what I have built with my life. Even if I wanted help from my family, they were in no shape to give it. There was never a college fund. My vacations consisted of camping. I did not get a computer in the house until I was in my 3rd year of HS. We could not afford DSL, so we lived off of Juno because it was free dialup internet.

I was lucky, as I was always a fairly smart kid. I have a HS diploma and am making pretty close to the max avg for a person without a degree. I was going to a community college but put that on hold to buy a house. So no, not a silver spoon, but compared to you Dave, taking boat trips into the Hamptons on boat trips would have been well out of my families ability.

 

[realibrad]

While I disagree with him on a lot of things including this issue, I find Brad to be a smart young man with well-reasoned opinions. Smart people with opinions other than my own are those I consider most worth reading, personally, as I'm not likely to learn much from my own opinions. But YMMV.

Right back at you.

I figure if my ideas can't hold up against others, they were probably wrong.

 

[Olikan]

Guys, the "american dream" is noting but a sporadic event in the story of capitalism.
Have you seen "les miserables"? Well, you should
Becauses that was capitalism in the past
Very similar today, see Mexico and Brazil
And that will be in the future, you can`t blame anything it`s capitalim just following it`s course

 

[Spungo]

And that will be in the future, you can`t blame anything it`s capitalim just following it`s course

It seems like every system eventually collapses. Before 1917, Russia had a certain flavor of capitalism that collapsed because it became top heavy. The people at the bottom eventually want heads on the chopping block, sometimes literally. Then they switched over to communism and the same thing happened. People with tight political connections in the communist party end up having a lot of wealth and power, the system gets top heavy, and it collapses. Now Russia is back to capitalism. How long until this project fails and reverts back to socialism? Who knows. It might take 70 years, but it will eventually happen.

On a personal note it makes me sick to think my parents got a house with an inground pool, 1 car garage, 3 bedroom 2.5 bath for for $140,000 in 1990 - my condo in 2009 was 160,000 for less house. Hell they even turned it into a 5 bedroom house for an additional $20,000 a few years later.

You need to take the interest rate into account. Housing prices were much lower because interest rates were much higher. At the end of the day, their monthly payments were just as high as today, relative to income. I can't remember the exact number, but my parents were paying something like 15% interest back in 1980, but their house was far less than 100k. You can go through the math and find that 15% interest on 60k or 70k is still expensive. Housing has never really been cheap in terms of monthly payments.
The higher interest rates are also the reason people would put down 20% instead of 5%. If your house is 70k, 20% down payment isn't really that much. Factor in the way you could easily get 10-15% yearly interest on a government bond, and that down payment seem to magically appear with minimal effort. Now that government bonds pay basically nothing, and low interest rates make houses cost 300k or more, putting down 20% is laughable. How many years do people plan on renting while they try to save that gigantic down payment? I always laugh at the people who insist on saving 20% down. How long will that take? 5 years? And how much money was lost to rent during that 5 year period? It's a hell of a lot more than what would be paid in interest if they chose to buy the house with only 5% down but do it several years sooner.

 

[randomrogue]

Unless you can afford to buy a home outright then the monthly payment is what matters. At $60K your monthly payment would be half of what a $300,000 house is today. Have salaries doubled?

The big question is can Americans afford a mortgage payment and pay no more than 30% of their income on a respectable home? If you borrow $350K then your payment is around $1720 a month. Add in maintenance and taxes. Lets just call it $2000 a month to make this simple. How many households are pulling in $6666 after taxes? On the coasts it's much higher but even these numbers are interesting.

Total table napkin math not taking into account deductions and whatnot but $80K after taxes is a decent income. I imagine that's close enough to the $130K mark.

Instead what's happening is that people are paying way more than 30% of their income on housing and are sacrificing on other things like vacation. At least with my friends vacation is camping unless they are making more than say $150,000 a year as a household. Camping is about $75 a day for the whole family. Worse yet they're sacrificing on retirement. I shudder to think what this county will look like in 30 years when all these broke people are going to retire on social security.

 

[Mai72]

I saw Obama was cracking jokes at a barbecue joint in Texas.

We need jobs Mr. President! Not jokes.