September 2013
GETTING TO EVEN
Balance is implied by the word even.
The population is evenly balanced between males and females. Wrong will be set right when the abused get even with their abusers. The ship slips across the water on an even keel. Things will be set even after the bills are paid and the profits are distributed.
Getting to even has to do with putting things right - establishing or restoring order when there is an apparent or a potential state of disarray.
Chaos and disorder are conditions that fail to bring contentment. Knowing what may happen tomorrow is an outcome that most of us would prefer. We get nervous about the unknown and we like being able to predict the future. It matters not that perfect prediction is impossible. We want and usually demand certainty in our lives.
Here is a command that almost everyone wants to issue:
No surprises.
Unfortunately this incessant need for certainty is bound to disappoint.
In 2006 for the vast majority of adults in the United States nothing was more certain during the previous half of a century than the continual increase in the selling price of a house. By 2010 almost everyone had a house worth less than their mortgage if they had bought with little or no money down in 2006 or 2007. Regardless of the misfortune of these late comers, the wealth of many in the United States was immensely and significantly advanced because of the ever increasing and dramatic rise in sales prices of residential housing in the decades after World War II and before 2006.
Is a housing rebound the answer?
Can it happen again? Can we “get to even” ?
Here is what is different now compared to 1953, sixty years ago:
In 1953, a new family home just south of San Francisco could be purchased for $12,500 in Pacifica, CA.
In 2013, existing family homes just south of San Francisco in Pacifica, CA, had an average sale price of about $677,367.
The 2013 sales price is 54 times more than the sales price in 1953.
In 1949 the median family income in San Francisco was $3,923 according to the U.S. Census. In 1953 the Census estimated that national median family income was $4,233. In San Francisco the median family income was no doubt higher, perhaps as high as $4,600, more than one-third of the cost of a new house in 1953.
Consider these astounding realities:
In Pacifica, CA, for a home buying family to be in the same position in 2013 as one was in 1953, their annual income would have to be $249,271 per year.
For a home buying family today to have their newly purchased home appreciate as much in the next sixty years as one did in the last sixty years it would have to sell for $36,577,818 in 2073. At that price the typical home buyer would have to have an annual income of about 9 million dollars and a down payment of about 7 million dollars in order to buy that house. Such average prices are not possible since the number families having multi-million dollar annual incomes is not likely to grow dramatically in the next six decades.
The greatest future problem for much of the U.S. Housing Market will probably be the stagnant income growth of many American families and the continued shrinking in the amount of discretionary dollars that they have to spend.
Spending is the issue:
Why do Americans have less to spend?
Many American families are going broke largely because their share of income spent on housing and healthcare has dramatically and continually increased over the last sixty years. Saving for their children’s education and for their own retirements has also impinged upon their ability to spend.
This is one reason why “getting to even” in the coming decades of the 21st century may prove to be impossible for an ever increasing number of families in America.
