I am about a lot of things ;) but what to do about my housing situation is pretty high on that list.
The housing market is ridiculous!
In the 1950's most families could usually comfortably afford to purchase a house. The average annual income per household was around $3,300. The average house price was around $7,300.
That means the average house price was around 2.2 times the average income.
The average house price today in the U.S is around $190,000. The average family income is around $51,000.
That's around 3.7 times the average income.
On it's own that shows that house prices when compared to annual income have gone up by 59%. That's ridiculous in itself but is not the complete answer.
There is one very large difference between the 1950's and today.
In the 1950's only one earner per family was the norm. Today, many more families have two wage earners. In fact, it's around 70% of married couples today.
So adding that to the equation means that very roughly the house price today is comparatively speaking around 2 times the price it was in the 50's.
That's awful and I feel really bad for those trying to get onto the property ladder. The thing is though, I'm not in the U.S. I'm in the U.K. This is our stats.
In the UK the average house price is around £284,000 ($407,795)
The average annual income per family is around £40,000 ($57,436).
That's a whopping 7.1 times our annual income.
Repayments on a mortgage of £284,000 would be around £1744 per month for 25 years and will cost a total of around £525,000 ($752,981.25).
To put this in perspective, a family surviving on minimum wage - even if both adults are working full-time, would likely earn around £2500 per month. Buying a house is just not feasible for a family on this kind of income.
Surely you've got to be nervous signing up to pay £1744($2501) every month even if you can comfortably cover it?
A 15% deposit on a house that costs £284,000 would be around £42,600.
Only 20 or so years ago, you could buy a house for the cost of the deposit in today's market.
So renting housing seems to be the only option for many families and low-income individuals. This is the case all over the developed world.
Unless the housing market crashes, which could happen... It seems very unlikely that this situation is going to change any time soon.
Here's my opinion (for what it's worth)
Even if I could afford mortgage repayments of £1744 per month comfortably, I still wouldn't buy a house to live in. Buying a house to rent out or sell...Perhaps, but not to live in.
Lets say I have to work 40 hours per week in order to pay off that mortgage. In total over 25 years that's 52,000 hrs. Lets say my wife does the same thing. That's 104,000 hours of labor in total. 104,000 hours!
Is owning a house worth 104,000 hours of your families time?
To put that into perspective that's around 6 years of labor per person if you could work 24 hours a day.
Houses are made from some of the most abundant materials on earth. You can pick most of these materials up in your hand in most fields or anywhere else for that matter. Yes the materials are treated, fired, cut, shaped, weathered etc... But if you fire clay to make bricks how much value does that add? It's still clay.
The 2014 Survey of Construction (SOC) from the Census Bureau shows that the average completion time of a single-family house is around 6 months.
How many builders work on a house? Even if 10 builders worked full-time for 6 months that's only 10400 hours.
So the other 93600 hours is fair for a small patch of land and some materials that are all around us?
I realize I'm over simplifying things here but I think you probably get my meaning.
Houses aren't worth submitting to 104,000 hours of labor. They are too expensive and are in no way a good investment.
How come no-one seems to be questioning this? It must be like 'The Emperor's New Clothes'. People believe houses are worth this kind of money so they are.
So, do we carry on renting? Giving away our hard earned money for nothing of substance, until the Emperor is finally found out to be naked?
Is there an alternative?
That's the starting point for this site.
We're searching for better ways to own a home. Better ways to live our lives, preferably without having to submit to deals that aren't in our favor.
There's got to be more to life.