In the last 10-15 years, home buyers have gotten far more diligent and informed in their pursuit of the perfect dream home. From the early 1900's to the late 60's, homes for middle America were typically very basic. The average home had simple kitchens, small rooms, even smaller closets, and a minimal number of bathrooms. Many homes only had one bathroom. However, with dual incomes and favorable lending plans, the public is demanding a more rewarding living experience. This demand for better and nicer homes has prompted home buyers to pay more for homes, demand the best from real estate agents and stay on top of their internet home searches.

The high demand change is a significant difference from the conditions home buyers have historically faced, with the exception of the period between the years 2004 and 2007. Housing reports now show that home prices now exceed levels set at the housing market’s previous peak in 2006. As we look at home prices over the last 100 years, you may wonder, is another housing bubble on the horizon? I advise clients to watch interest rates, local/national news, review other economic indicators and call me for any real estate related questions. Education and working with the BEST real estate agents is essential.

Let's look at homes prices over last 100 years and refresh our memories about the most recent housing bust. Let’s start by looking at the U.S. Census Bureau figures for housing prices over the decades. In 1950, the median home price was just over $8,000.00. Great price right? Looking forward 50 years, the median home price was $120,000. This year, the median existing home price reported by the National Association of Realtors surpassed the record of $227,100 set in 2006. As of this post, the median price was approximately $232,500. Adjusting those numbers for inflation gives us some perspective. The median price for a home in 1950 in inflation-adjusted dollars was just over $44,000. Compared to the current median price, that’s an increase of almost $188,000 in 66 years!

One driver of home prices is size. As referenced earlier, the homes were modest back in the day. In 1950, the average home size was less than 1,000 square feet with two bedrooms and one bath. By 1970, the average home was 1,500 square feet and included a third bedroom and another half-bath. Today, the average new home is 2,500 square feet with two or more baths and at least three bedrooms. And all this is in spite of the fact that family size decreased from 3.37 members in 1950 to 2.54 members in 2015.

So what are a some of the factors allowing home prices to increase over other products and services? For the most part, changes in the mortgage industry allowed home-buyers to borrow more and spread their payments out over a longer period of time. Second, more families now have two incomes for increased purchasing power. Lastly, there are more comfortable and spacious homes with higher quality design and building features.

Consider these facts...In the 1930s, mortgages had variable (non-fixed) interest rates, required high down payments, and home loans only had five- to ten-year terms. The maximum amount a home-buyer could borrow was 50% of a home’s value. This all evolved during the Great Depression and following World War II resulting in the development of the long-term, fixed-rate mortgages we enjoy today. Noting by the mid-1950s, the maximum mortgage term was 30 years and buyers could finance up to 95% of their home’s value thru government insured programs.

The charts below can be reviewed for some the interesting pricing changes in American housing prices.

 


Average Cost Of New Home Homes
1930 $3,845.00 , 1940 $3,920.00, 1950 $8,450.00 , 1960 $12,700.00 ,
1970 $23,450.00 , 1980 $68,700.00 , 1990 $123,000.00 , 2008 $238,880 , 2013 $289,500 ,
Average Wages
1930 $1,970.00 , 1940 $1,725.00, 1950 $3,210.00 , 1960 $5,315.00 ,
1970 $9,400.00 , 1980 $19,500.00 , 1990 $28,960.00 , 2008 $40,523 , 2012 $44,321 ,
Average Cost of New Car Cars
1930 $600.00 , 1940 $850.00, 1950 $1,510.00 , 1960 $2,600.00 ,
1970 $3,450.00 , 1980 $7,200.00 , 1990 $16,950.00 , 2008 $27,958 , 2013 $31,352 ,
Average Cost Gallon Of Gas
1930 10 cents , 1940 11 cents , 1950 18 cents , 1960 25 cents ,
1970 36 cents , 1980 $1.19 , 1990 $1.34 , 2009 $2.051 , 2013 $3.80 ,
Average Cost Loaf of Bread Food
1930 9 cents , 1940 10 cents , 1950 12 cents , 1960 22 cents ,
1970 25 cents , 1980 50 cents , 1990 70 cents , 2008 $2.79 , 2013 $1.98 ,
Average Cost 1lb Hamburger Meat
1930 12 cents , 1940 20 cents , 1950 30 cents , 1960 45 cents ,
1970 70 cents , 1980 99 cents , 1990 89 cents , 2009 $3.99 , 2013 $4.68 ,
Some of the above can be explained due to the inflation over 80 years , but there are also many other reasons why some prices increased dramatically ( Housing Bubbles. Middle East Wars, Weather problems causing food price inflation, Population explosion, )