The housing market has ’80s vibes. The ’90s are back for clothing, but it’s the early 1980s when it comes to housing narratives. Today, I want to show some headlines from over forty years ago, and I’d love to hear your take.
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NEW MEME:
A Jason Kelce meme that I shared during the game on Sunday.
THANK YOU TO THE SACRAMENTO BEE
I got permission from The Sacramento Bee to use these images. I found the headlines through the Sac Library archives. I am a digital subscriber to The Sacramento Bee, and I appreciate what they do (please subscribe).
YO MAMA’S HOUSING SHORTAGE:
Did you think the housing shortage narrative was new? Nope. I can’t say exactly when this began, but it’s been around for many decades. In other words, it’s not just my shortage, but it’s my mom’s too. Check out this headline from November 1980 in The Sacramento Bee.
Source: SacBee today / archives
OOPS, THE FED DID IT AGAIN:
This headline from May 1980 could be written about today’s market. Here’s the formula. The Fed increases rates sharply, that changes affordability, and we see sales volume slump. However, new construction back then really struggled, but today in light of so many sellers sitting in the existing market, builders have been thriving. And yes, the “oops” mention is a Britney Spears reference. Sorry.
Source: SacBee today / archives
BUYING A HOUSE FOR 11 RASPBERRIES:
This is a viral bit from a few years ago that fits perfectly today. There are deep emotions when it comes to affordability because we’re talking about people’s lives. This isn’t just an academic conversation with stats. This is very personal, and that’s why different generations need to work to understand each other.
LIKE, TOTALLY INSERT MILLENNIALS OR GEN Z:
Look, Baby Boomers ended up winning big-time, but isn’t it interesting to see how it wasn’t a walk in the park for Boomers at the time? Check out the highlighted portion below. Frankly, this piece could be repackaged today, but instead of “Boom Babies,” we could insert “Millennials” or “Gen Z.” By the way, I’m Gen X. Not that I need to say this, but I imagine some are wondering. Technically, I’m a younger Gen X as I missed being a Millennial by five years. But forget about me because that’s what people do about Gen X.
Source: SacBee today / archives
RECYCLING HOUSING NARRATIVES:
This article from December 1981 mentions inflation, dropping sales volume, younger adults having to live at home longer possibly, and so many of the things we’re talking about today. All too familiar. Isn’t it wild how these narratives from yesteryear have been recycled? Like I said, ’80s vibes.
Source: SacBee today / archives
LOWER, BUT NOT A PIECE OF CAKE
Back in 1981, the median price finally went above $100,000 in California, and it’s mind-blowing to even think about that since the median home price in California was $819,740 last month (CAR). However, it wasn’t easy to buy a house back then due to high rates, and I think that gets lost in translation sometimes as we talk about housing dynamics. By the way, I’m not trying to diminish the problem of affordability today (see more on that below). I just wonder sometimes if we only look back to the “good old days” thinking it was a cinch for buyers. With that said, if you brag, “I paid $56,000 for my house in 1982, and I’m so glad I did,” that’s a tough thing to hear today for many young people who feel hopeless. Not cool to do. But young people aren’t off the hook either because too many Boomers are unfairly labeled as just one thing. Anyway, I’m getting off topic, but it’s good to evaluate how we’re showing up.
NOTE: Adjusting these prices for inflation doesn’t come anywhere close to today’s prices. $100K adjusted for inflation is $346K.
Source: SacBee today / archives
Anyway, I hope this was interesting. I got intrigued poking around old articles, and I hope you enjoyed checking this out too.
A FEW CLOSING THOUGHTS
1) Affordability today is no joke: I’m not diminishing the reality of a lack of affordability today, and I hope to not get destroyed in the comments from people who think that is my intent. There is no sugarcoating the cost of buying and renting in 2024. Last year, we were missing about 40% of local buyers from the pre-2020 normal, and a lack of affordability was the big culprit.
2) Every generation struggles: I know it might sound a bit off to say this, but one encouraging layer here is seeing previous generations struggled too. I think it’s easy to feel alone in the struggle to afford, but there is something maybe mildly comforting about seeing that affordability has not always come easily through the decades. In other words, you are not alone. The truth is it’s easy to feel overwhelmed with housing headlines today, but many of these narratives have existed in the past too (I still think it’s more challenging to make it work today though).
3) There is hope: History tends to rhyme, and one thing about housing markets is they are always changing. As a broker friend told me last year, “the good markets don’t last, and neither do the bad ones” (Nick Brooks). I think that’s spot on for real estate professionals, and it’s true for buyers and sellers. In short, right now we’re in a tough part of the housing cycle because the market feels very broken with sellers sitting back, but it won’t always be like this. I can’t promise the future, but I can look to the past and say there is an ebb and flow to affordability, sales volume, and homes prices. And sometimes things end up working out even when it seems there is not a pathway to financial progress or homeownership.
Thanks for being here. And thank you again SacBee for the permission.
Questions: What stands out to you most about the headlines above? Do you think we’re going to be recycling headlines today for future generations also? I’d love to hear your take.
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Hey Ryan,
Very interesting trip through the archives. As always, you do a great job bringing context.
Thank you Joe. I had fun with this one. I appreciate it.
I really can’t see the California market changing significantly until we address the supply issue. If things like office conversions, builders remedy projects and residential rezoning can take off in the next decade, we might start making an impact and improving affordability.
Thanks Ben. I tend to agree. I wonder if the idea of office conversions are going to be eye candy or something that actually happens. Vacant buildings aren’t a good thing for anyone.
I love the trip you took us on and we didn’t even need a DeLorean. Ok, I still need a DeLorean, but those were $25,000 new then and around $75,000 now used. Not bad considering the cost of new cars today, but a lot of money for a car that goes 0 to 60 in terribly slow 9 seconds or so.
Haha. Such a good DeLorean reference. If you owned one of those, I imagine you’d have to join some sort of a DeLorean club.
Hi Ryan –
Not a real estate pro, but a big fan of yours from Vermont. You do such a great job, with consistently thorough and thoughtful analysis. And your kindness and caring always come through as well – so important.
Loved this entry in your blog about ‘80s, having bought my first home way back then.
So Boomer, yes — guilty as charged. But sometimes feel I must be missing something about how much harder it is today for young couples to buy a home as compared to ‘80s. Will supply comparison figures below and most sincerely would appreciate constructive feedback from your readers to show me where I am going wrong. Thank you.
Bought home in Vermont in early ‘80s based on numbers as follows:
Home price for fixer-upper in small rural town: 50,000
Down payment of 5%, 2500
Monthly payment at 14.5% interest including principal, interest, taxes, insurance, private mortgage insurance: 730
Annual income on two Vermont teachers’ salaries: 28000, 2335 per month
Mortgage to income ratio: 730/2335 = 31.3%
Similar home today (fixer-upper of same size, same town)
Home price for fixer-upper: 300,000
Down payment of 5%, 15,000
Monthly payment at 7% interest including principal, interest, taxes, insurance, private mortgage insurance: 2525
Annual income on two Vermont teachers’ salaries: 110,000, 9167 per month
Mortgage to income ratio: 2525/9167 = 27.5%
Thank you so much Willie. I appreciate the kind words, and I love the example you shared. Thanks for spending the time cranking that out. I think this is a valid comparison that many people overlook in the midst of narratives about Boomers compared to everyone. I wonder if we’ve seen a difference today in the cost of healthcare, student loans, insurance, rent, etc…? Could that make it more challenging today? Moreover, I think some of the sticker shock here is that home prices are far beyond their inflation-adjusted level today (though we can’t divorce this stat from income). In short, it seems like the other stuff is the big hurdle. As a dad of two Gen Z kids, it’s sobering to look at market rent and I wonder how they can get ahead today while starting out at such lofty levels. But that’s just my subjective experience.
For any onlookers, feel free to pitch in your stories, share perspective, share some stats, etc…
I know Redfin posted some data the other day about homeownership rates, and it shows Millennials are a few percent behind Boomers when Boomers were at the same age. Though there is critique of the data too because the data only shows owners who head the house (doesn’t account for adults living at home or renting, which some say is a growing population). Like all stats, it’s sometimes difficult to decipher the truth.
My pleasure, Ryan. Glad you found this useful.
You make a good point on the student loans. I was paying mine back in the ’80s but it didn’t take up that large a percentage of my income.
Mentioning your kids made me think of mine in this context. Both of them (aged 36 and 31) have been fortunate in purchasing nice homes, and neither one has student debt. We were blessed in having them attend a top college with very generous financial aid and that, as well as careful planning, allowed them to graduate debt free.
As this last piece is really off topic, will get together some info this weekend on how it was done and send it to you at the email address on your company’s web site.
That’s awesome, Willie. That’s a great goal for families if possible as student loans can be such a financial noose. I have friends in their fifties who still have loans. In California, we have free community college these days (classes are free, but books are not), and that can be really helpful for families or individuals considering how to make things work. My sons are both doing two years of junior college before transferring to a 4-year. That’s exactly what I did, and it worked out well for me. And this plan fits well with our financial plan for their college too.
Hi Ryan, Very interesting article. The Vermont example is also interesting but does it compare to the big metro areas of California. I would like to see the incomes to 2 teachers, house price of 1980 and the same two teachers and house price in 2024 in a large metropolitan area in California. Have the incomes increased at the same rate as the the house price? Thank you for all the information you provide.
Solid question, and something we need to consider. The proof is in the stats. I may have to track down some income stats for California to help us visualize this and have conversation. I don’t have that handy right now. If any onlookers have a good data source for me to export into Excel, I am open ears. Thanks Jack.
Ryan – great job on the news clippings ! I was young adult consumer in the 1980s… yet to jump into the Appraisal profession — I started in 1989.
FLASHBACK:
My sister’s first home she bought in San Rafael, CA in 1981— 14% interest… (she needed my Mom, to co-sign the loan, because, the PITI was so high…
My first house in LA in 1989 — 10% interest !
CURRENT: 30 yr. fixed 6.85% sounds cozy when you really reflect upon the early ’80s crazy affordability equations here in California !
Bruce
Thanks Bruce. I appreciate hearing your family rate history. You’ve been in the game for a bit. Technically, you became an appraiser the year Taylor Swift was born. Haha.
Hi Ryan,
Just for reference, can you post a graph of what the market did in the 80’s? If that data is available it might be interesting to see what is to come if we believe in history repeating itself.
Hi Brad. I can’t believe I didn’t even think to post that. Here’s a post from early 2023 where I had prices from the 70s onward in Sacramento. I may update this graph soon too. I might have updated it in a more recent post than this, but this will get you what you’re looking for. I have a visual adjusted for inflation and not adjusted. I think it’s important to look at it both ways, and I find the inflation-adjusted graph helps show the trend a bit more. https://sacramentoappraisalblog.com/2023/03/14/real-estate-price-cycles-getting-bid-up/
I’m a 1978 “Xennial”. My dad bought at house in the early 80s for 100k at 18 percent interest in Pleasanton. We sold and moved away, but that exact house is now 1.6 million.
I don’t envy a single thing about the older generation, other than their work ethic.
So wild. And that’s the truly stunning part. Did your dad add on to the house? If not, that’s an absurd increase.
I loved this comparison to the 80’s! I am one of the boomers. My sons are all in their 40’s. Two living out of state in more affordable areas have been able to buy homes. My one in California cannot. It’s tough for the younger generation with the burden of student loans and the cost of raising children today. It isn’t just the cost of housing and interest rates holding the younger generations back.
Thank you Carol. That’s a solid point. One of the struggles with kids not living near parents these days sometimes too is the cost of childcare. $500 a week is not unheard of. Imagine how much money you have to make to make things work today?
Had such a great time reading this one Ryan, thanks so much! With some people in the biz panicking, it is also a great reminder that the market is always cyclical, hang in there peeps.
Thank you so much Michael. I appreciate the kind words. And that’s exactly right. I think history reminds us there are cycles. It’s time for many in real estate to weather the storm.
Great post and so relevant, Ryan. You did a great job in sifting through the old news to find a pattern to what we are all going through today. My kids have just graduated college and are in their first jobs and on their own so I know firsthand what young people are going through. Housing costs are definitely taking up a larger percentage of their income than it did for us when we were their age and I feel for them. Keep up the great work!
Thank you Tom. That’s so cool with your kids being out of college. Mine are in the thick of it.