re: Wall Street Journal - 100k not enough anymore for home ownership

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That article is complete shite.

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So because you (N = 1) were able to afford a modest home on a modest income 25 years has nothing to do with the ability for majority people to afford a home now.

I mean home (3.98% annually) and rent prices have outpaced income (2.99% annually) considerably from 1994 to 2018 (most recent year available on St Louis Fed for income), even with the housing crash. So an $85,000 home was 3.15 times your $27,000 income, but using the averages above, that $85,000 home would be worth $216,750 and your $27,000 income would be worth $50,057. That same home would be 4.33 times that income in 2018.

Put another way, 4.33 times your $27,000 income would have been $116,913, nearly 38% or $32,000 more. So now all of a sudden your modest home is probably unaffordable on your modest income. Is that BS too?

In addition, the article states that a major issue is that student loan debt is a major barrier to home buying today. So there is much more going to that debt, which means that’s much less that’s able to go towards homes that are more expensive relative to income on top of that.

And personally, the biggest financial impediment before we bought our home wasn’t the student loan debt (which didn’t help), it was the childcare costs. We were paying $15,000 a year for daycare for one child, and that was on the cheaper end of the options. And those costs were rising rapidly, over $1,000 per year and our rent was increasing even more rapidly (in the 2nd hottest housing market) by over $1,600 let hear in that time. If it wasn’t for a major consulting project with a huge boost in income, I don’t know if when we would have been able to afford a home as each year requires more to save for a downpayment but rent/childcare increases were cutting into potential savings.

And while student loans were the least of those costs, $40,000 were going to those loans, rent, and childcare. And that’s more of the norm, if not lower than many others (multiple kids, more loans, higher rent), and we don’t make that much more than $100,000 so we’re probably a good representation of income and expenses that’s discussed in that article.

So if 30 to 50 percent of your $27,000 of your income was going to rent, childcare, and student loans, and your $85,000 home cost $117,000, then maybe your anecdote would at least be comparable and much more impressive. It still would be just an anecdote that disproves nothing regarding the large-sample of real data, but at least it would be impressive.

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25 years later, I still have that house, its paid for, is worth twice that and has been a rental for the past 20 years, making $1350/mo.

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And this only further shows your situation bears little resemblance to most people. A $170,000 home renting for $16,200 per year is a price to rent ratio of 10.5, which well below the average of over 18.5 in the 84 metros in this article. So if that’s representative of your area (especially if historically), owning a home is much more favorable financially than renting than most places. Only Cleveland, Toledo, Detroit, and Memphis have lower ratios, and those cities are not doing well financially at all and probably doesn’t have a large proportion of $100,000 income earners who are unable to afford a home.

And in an average city, a placing renting for $1,350 per month, would have a price of $300,000. So again, if it was like that 25 years ago, buying $85,000 home would be more like $150,000 home in average city using those figures.

So it seems that things just worked out for you. You bought a home in a home buying market, when homes were much cheaper relative to income, and before education (and childcare) costs rose dramatically, leading to much higher student loan debt. And you were able to turn that into a rental in a place where rental income is significantly higher than costs compared to most places.

Good for you, and I’m sure you worked hard for it all, but your post doesn’t make it seem like you realize how much easier it was financially than those the article is referring to, many who probably are working just as hard as you did. There is nothing wrong with being proud of your own success and hard work (you should be), but maybe you should realize that your success relative to those in the article, also had a lot to do with things that are outside of anyone’s control, and not Jesus’s you were automatically superior to them.

Where to Buy: Price-to-Rent Ratio in 84 U.S. Cities