I intended to include this in last night’s post, but it didn’t quite fit.
You won’t be surprised to learn that Mssrs. Harris, McHenry & Baker, homebuilders of 1925 disapproved of renting. Sorry, renters but aside from the full page of sentimental and financial arguments they print in the back of their plan book, they go so far as to sniff at you for not exercising your full rights of citizenship.
Still, they had a point. To wit:
Click to embiggenate if you can’t see the figures, but they’re showing what a household’s “rent-paying habit” (yes, that’s what they call it) adds up to over 10, 15, and 20 years, assuming six percent compound interest. The low-end rent amount is $10; the highest rent they figure anyone’s paying is $100.
Granted, the average income in 1925 was just a shade over $3,000 (usually with one earner in the family), while average household income is around $60,000 now (often with two earners). And let’s not even get into why that’s so.
If we use the now-standard guideline that you can “afford” a house that costs three times your annual income, Joe and Josephine Average of 1925 could buy a $9,000 home — which was a lot of house in those days.* Now the average householder can “afford” a $180,000 home.
In my town, $180,000 could get you a slightly neglected Victorian or Craftsman on a hill with a nice view. Not a bad house, but one that needs TLC. OTOH, the local average income is far below $60k. In San Francisco, Boston, NYC, or Seattle, $180,000 wouldn’t even buy a bare, trash-covered lot, and you’d better hope you had one of the famous jobs in finance or high tech, rather than one of the jobs waiting on the high-finance-tech folks at Starbucks.
Of course all then-vs-now comparisons are bogus. There’s never a direct correspondence. The denizens of 1925 were, for instance, probably paying a much larger percentage of their income for transportation and appliances. But then, they also paid vastly lower taxes unless they were rich. In those days, more people probably saved up and paid cash for houses or at least made giant downpayments; nowadays, it’s mortgage all you can. There’s just no way to draw nice, straight lines.
So you can quibble about the figures and parse them as you like. You can have some fun calculating how far your $25 monthly rent or mortgage payment would have gone in 1925 compared with your $750 rent or mortgage payment now. You can curse the Federal Reserve and damn ever-expanding government. You can get nostalgic looking at Craftsman houses and the former costs of owning them.
Just remember that there never were any Good Old Days, and that smug and prosperous 1925 was just a whisker away from the disaster of 1929.
* Shortly after the crash of 1929, my grandparents bought a large, impressive stone edifice in a good neighborhood for $2,000. The architect who built it for his own family had committed suicide and the property was what the folks of 2008 would have called distressed. In 1925, the same place would have probably cost several times more. Dollar for dollar, grandpa and grandma got a much better deal than the one I got when I bought Ye Olde Wreck for $10,000. But in both cases, an earlier homeowner had to suffer for the deal to become possible.