How Much House $1 Buys — 1998-2008-2018

While much of the U.S. bricks and sticks retail industry is struggling, given the structural shift in shopping, not included in that disarray are stores where everything is $1.  I am also old enough to remember when my weekly allowance was $1.   A single dollar in those days, however, bought a lot more than today — from chocolate bars on.  Not only did each chocolate bar cost more over time, it also became smaller over time .

The same is true with housing.  A dollar isn’t what it once was is a major understatement when it comes to buying housing.  To track this, Zillow looked at how much $1 buys in housing (in square inches) in 1998, 2008 and 2018.  A single dollar bill bought 2.09, 1.23 and 1.07 square inches of the median priced U.S. home in 1998, 2008 and 2018, respectively.  As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market.  Nor are home prices, sizes and appreciation (depreciation) rates the same.

The following table includes 35 cites plus the U.S. as tracked by Zillow.  The least amount of home that $1 buys today is in San Francisco at 0.14 square inches, while $1 in Memphis yields 2.53 square inches.  That means that a buyer in Memphis gets 18 times more square inches of home for every $1 spent than a person in San Francisco.

The next table shows the percentage loss in purchasing power of $1 for the past one and two decades.  The table is sorted starting with the largest decline from 1998 to 2018.  In 1998 Washington, D.C., $1 bought 1.33 square inches but is down to 0.28 square inches today — a decline of 78.9 percent.

Income, however, has also changed over these time periods.  The next table shows the median household income in nominal terms (not adjusted for inflation) annually since 1990.  Household income for 2017 and 2018 were estimated, having been increased by the average hourly wage gain as reported by the Bureau of Labor Statistics.  This resulted in an estimated gain of 2.6 percent in 2017 and 2.7 percent in 2018.  While the average U.S. $1 purchasing power (square inches of a home) shrunk by 13.0 percent from 2008 to 2018, median household income rose 23.7 percent.  The purchasing power of $1 from 1998 to 2018 went from 2.09 to 1.07 square inches, a drop of 48.8 percent.  Assuming the 2018 median household income estimate is correct, U.S. median household income rose 60.0 percent – more than offsetting the average decline in what $1 buys.

To read the article from MPA (Mortgage Professional America) click  https://www.mpamag.com/market-update/how-much-home-can-you-get-for-a-dollar-110258.aspx

Just like chocolate bars, housing is costing more while the size shrinks.   Incomes, however, at least on a national basis, have offset these factors for the three time periods of 1998, 2008 and 2018.  The next blog will look at median home prices and household incomes.

Ted

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