I’d be interested in looking into whether spending/saving/income fluctuated at specific periods since 1900. I can imagine many adult “depression babies” spending more freely in the postwar era. Can imagine another bump in the “greed is good” 80s. I don’t get the impression that the 08 recession changed practices too much.
It also seems as tho throughout my life there have been more and more “user fees” and services have been “unbundled.” Sure, there are exceptions, such as long distance telephone. I believe such efforts are generally offered as giving the consumer more options and more potential savings. I wonder what the real effect has been? Because it often “feels” as though I’m continually being nicled and dimed.
I’m missing something. When your grandparents were in their 20s they had to save up for a few years to make a deposit on a house. Now it’s “simply not possible” because you’d have to save up a few years to make a deposit on a house?
This has pretty much always been the case. My grandparents saved years for the deposit on their house in 1969, and it was $14,500. My first purchase was $150k and it took me three years to save up the deposit and closing costs.
The issues being that 1) that “big wage later” is more and more unlikely (or involves more work than they’d like) and 2) if it does happen the recipient often simply decides to “not deprive themselves” even less, rather than finally accumulating wealth.
I agree with millenials that things are tougher for them in general. But while every generation has had it’s “tra-la-la-la-la-la, live for today” types, we seem to have a higher percentage now. I’ve had several conversations with 20-somethings that go like this:
“Where do you want to be in five years, what’s your life like?”
[Describes nice house, nice car, good salary]
“Okay, so how are you going to accomplish that?”
“Umm… you know… I’ve gotta catch a break eventually.”
Things go downhill from there.
With a lot of those unbundled fees , there really are more options and more potential savings. But it’s only a benefit for certain people - I don’t get any benefit by airline tickets being available without any checked bags because I’m going to check a bag even if I feel nickeled and dimed by having to pay an additional fee. My daughter however, always looks for airline tickets that don’t include checked bags. Because she’s not going to check a bag no matter what, and when a checked bag is included in the ticket price, that means you’re paying for it whether you check a bag or not.
That sounds like you live in a place with reasonable housing costs, where a house cost several year’s salary. My house was about 3X our income at the time–and we were a teacher and a grad student. But if the downpayment on a house is 3X salary, you can’t just save for a few years–you have to save for 10 or 15 or 20. It just doesn’t compare.
I live in an area where housing costs are generally considered to be high - and yet my daughter and son-in-law just bought a house not far away for about 3X their income. The down payment was nowhere near 3x their income.
I’m not going to say that no one is in the position of needing to come up with a down payment of 3x their income- but I am going to say I don’t think it’s common. Even if we use a 20% down payment, on a $600K house that’s $120K. That’s three year’s income if the income is 40K , which is not an income that should be buying a $600 K house. The post epbrown01was replying to said it’s not possible for their generation because a down payment is more than one years’ gross pay, and it’s rising- that means the price of a house is 3-4 years salary assuming the down payment deposit is 25-30% of the price. If **Filbert ** means a 5% down payment is a year’s pay, that’s something else. But I seem to recall the UK requiring fairly high down payments.
I think the London area is also just one of those super-insane markets.
Another thought: among the upper middle class, the classic “expensive” hobbiesare in steep decline. Country clubs, golf, boating, vacation homes, big RVs. . .that whole lifestyle is aging up with the boomers. I don’t know anyone my age with a big camper, or who plays golf, or who bought a lake house or a boat. But when I was a girl, my friends’ parents did those things (my parents had 6 kids instead, and are frugal). Anyway, that’s a lot of money that the current generation of Yuppies doesn’t spend.
Google tells me that the median price of a home in London is £475,619 - ie about $620k in US dollars. Meanwhile average salary is around £39k - about $50k US (before tax). So actually, yeah, in London, people with take-home income of $40k or so are pretty much exactly the demographic for $600k homes.
Is that approximately $40k the average salary or the average household income? Because two people with an income of $40k each buying a $600k house is a different situation than what I was referring to ( a $120k downpayment being three years income)
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The number I got was average individual salary, which means it’s a little high due to being “average” not “median” and a little low due to being “individual” not “household” … but the difference isn’t a matter of doubling. (for instance, in Aus, the median individual income is something like $66k and median household is $84k). And then you have to take away tax to get disposable income.
epbrown’s numbers sound reasonable to me, depending on where you live. That is, if your income is 40k (either individual or household) that’s a pretty ordinary sort of income, and 600k is a pretty ordinary sort of house price.
I think the US has a fairly extensive “cheap market” (outside of big pricey cities) and highly concentrated “expensive markets” whereas the UK “expensive market” is pretty comprehensive, and in Australia it’s about three quarters of the country
Also, I don’t know if it’s a fair comparison to compare “single income 50 years ago” to “dual income now” in terms of saving for a deposit. Loads of young women worked fifty years ago, in the late 60’s. It’s just that they often gave it up when they got married. But the time you saved for a house deposit was *before *you got married.
Buying a house is an example of something that honestly was just a lot easier back in the day, and really really hard now.
Those were my numbers actually - but what I guess I’m really asking is what exactly did Filbert mean by
Does that mean a 5% down payment is a year’s pay , and house prices are about 20x a years income, so of course his generation will never be able to buy a house ? I’m not going to say such a place doesn’t exist but I imagine a place like that will have most residents living in apartments, either rented or owned.
Or does it mean a 25 or 30% down payment is a year’s pay, in which case probably the only difference between his grandparents/parents’ time and now is that possibly his parents/grandparents’ year’s pay was based on a job or a job and a half and now it would be based on two. I’m not sure how old Filbert is, but my husband and I bought our house over 30 years ago, and our 30% down payment was a year of our combined gross income.
And they sound insane to me. But the point - for this thread - I think should be “how does that compare the home prices/salary ratio a generation or two ago”? Since we’re talking about “these days” v. the past.
Also, what kind of homes get built. Certainly in the US, it was “starter” homes that were built in the 50s. Small and cheap. How much of that is built now (or perhaps, more accurately, how much of the market did it make up then vs now), and how much are people willing to buy such houses? Are we of this generation unwilling to buy small/cheap or is no one willing to build small so we have no option to? I kinda of expect it’s a combination of both.
Those starter homes are still around, of course, but now they are often in first ring suburbs and are super expensive. My house was a “starter” in 1960, but now the updated ones in my neighborhood go for $300k.
My parents saved for 2 years to get a house deposit, and the price of the 3-bedroom semi-detached house they bought as a first house was around 3 times my Dad’s annual wage, in what was considered a not very well paid job.
The cheapest 1 bedroom flat in the same area now is around 7 times the annual wage the staff doing the same job he did back then, at the place he worked, are now getting.
Oh, and back then, rent for a room in a shared house was less than 1/3 his annual wage, now it’s over 50% of the current equivalent.
In some parts of the country (like where I live now) house prices start lower, but full time jobs significantly above minimum wage are almost non-existent unless you’re highly qualified- say a doctor, lawyer or the like.
There are large parts of the country where, if you look at a combination of the average wage of a 20-30 year old, how much mortgage is available on that wage, the cost of even a rented room, and how fast house prices have been rising, the amount they would need is rising faster than it’s possible for them to save, short of living three to a bed and not eating for 5 years.
The 2-bedroom, 1-bath, unrenovated bungalows in working-class neighborhoods in my city go for that. Ours is a 1916 3-bedroom, 1-bath bungalow and was significantly more expensive than that. The one bath had been recently redone, but not much else other than a minor kitchen reno maybe 20 years ago with the cheapest possible materials.
I think a lot of these recreation “markets” will collapse in the next decade. There’s a minimum size needed to lure people into the business of providing it, and once below that, the hobby cannot sustain itself. I realize there will be pockets of very determined members, but these will be rare.
If you know any one with a private plane (Cessna, etc.) ask them how much trouble it is today to find a good mechanic. Or flight instructor. Would you go into the field of small plane maintenance if you were starting out a career?
I have a moderate-sized boat, and it spent 2 months languishing while I searched for a mechanic who was qualified to fix it. The shop on the lake that I could drive it to had folded. It was either bring the mechanic to it, or pay $$$ to have it pulled out of the water and brought to him. Same question as above regarding entering the field as a career.
These are still managing, but I think maintaining and supporting these hobbies at the middle class level will get more and more difficult over time. The waaay upper class level of private jets and large yachts is doing fine.
It was probably 15-20 years ago that I played a round of golf w/ a friend who was an orthodontist at his ritzy private club. I asked him who the members were. He said it wasn’t the doctors and lawyers, as had been the traditional reputation. Instead, all of the new members were “money men” - hedge find managers and the like. They were the people who had the disposable $ for such things.
Of course that is a single data point from long ago. And there are plenty of options for golfing other than at private clubs…
My parents are European immigrants, and my wife is a European immigrant. During the 70s-80s, my parents could afford to take us (family of 4) to visit the grandparents once every 5 years at best. Our family now (also 4, in a similar middle-class income percentile as my parents were) can do it every year, using approximately the same % of our income as my parents did. (In both cases, travel was fairly frugal “staying with friends/family”, so this is almost entirely transport-cost related).
RV sales are going nuts with younger people. They might not be the huge RV’s, but they are still buying expensive units, more often Sprinter van style conversions and trailers. If you drive around neighborhoods in the nearest large city to me, there are RV’s and trailers in lots and lots of driveways.
If the paywall gets you, the gist is that the number of 18-30 year olds playing golf has fallen 35% from 2005-2015. 137 golf courses close every year in the US. It’s basically in serious decline and there doesn’t seem to be anything standing in the way of that decline. Ratings are declining as well. It basically has the ‘baseball’ problem. It’s largely a sport associated with white people and white people are going away. (Baseball is really trying hard to rely on its Hispanic base, but can’t seem to get the viewership despite young Hispanics liking to play. Anyway, I digress.) If you’re in any business or venture that can’t attract minorities, then you have a structural problem. Golf’s is exacerbated because it also skews wealthy and old and wealthy, old people are particularly disappearing. I don’t think golf is going to go extinct, but look for many more course closures and dwindling revenues.