Two or three years ago, at Thanksgiving, a family friend asked my wife and I why we were looking at condominiums for our first home purchase instead of a house.
BECAUSE IT WAS TOO EXPENSIVE, PATRICIA (not her name).
Thanks to the internet and public records, it was relatively easy to look up information about her house. She bought her house, a three-bedroom, two-bathroom, in 1997, on the west side of Los Angeles, for just under $270,000. I *knew* that there was no way my wife and I were facing the same housing market she was in 1997. In writing this post, I looked at the numbers for the first time.
- 1997’s $270,000 in 2019 dollars is $427,377. Not terribly different from what we end up paying for our condo (WHICH WE LOVE AND ARE VERY HAPPY WITH – THANKS FOR ASKING).
- The Zestimate (the real estate website, Zillow’s, estimated value of the property, i.e., a proxy for what that home would now sell for) is just under $1,300,000 (i.e., $870,000 more than what she bought it for).
- Whether or not you account for inflation, her house has increased in value between 5% and 7.4% each year.
- How have wages changed over that same time period? Just 3.7% (Federal Reserve of Atlanta, Weighted Average). No indication whether or not this accounts for inflation.
- What has been the difference between her home value appreciation and wages over those 22 years? Depending on inflation accounting, wages have lagged between 43% and 258% over those 22 years.
So yeah, we didn’t a buy a house. Thanksgiving is great, isn’t it?
Pay your people PLEASE,
The Anxious, Amateur Economist
The Anxious, Amateur Economist 