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U.S. Housing Became Much More Affordable Over The Last 40 Years

Blog Post | Housing

U.S. Housing Became Much More Affordable Over The Last 40 Years

The time price of U.S. homes remained almost the same between 1980 and 2020. But financing a home got much easier.

Summary: Housing prices in the U.S. have risen sharply in recent years, but that does not mean that housing has become less affordable. This article uses time prices, which measure how many hours of work it takes to buy a house, to show that housing has actually become much more affordable over the last 40 years.


In recent weeks much has been written about the rising cost of U.S. housing. According to Reuters News Agency, the “rising cost of steel, lumber and copper is hampering homebuilding—and pushing house prices out of reach.” In that vein, we explore the affordability of U.S. housing between 1980 and 2020, using time prices, which measure the amount of time that an American blue-collar worker needs to work to earn enough money to buy a house.

According to the U.S. Census Bureau, the median sales price of a house in the U.S. in 1980 was $64,600. Given that the mortgage loan rate at that time was 13.74%, a 30-year loan for $64,600 required a monthly payment of $752.15. The average size of an American home was 1,595 square feet, indicating a monthly payment rate of $0.47 per square foot of housing.

According to Measuring Worth, a well-known database run by economist Lawrence H. Officer of the University of Illinois at Chicago and economist Samuel H. Williamson of Miami University, the average blue-collar worker’s compensation rate was $9.12 per hour. Therefore, a $752.15 loan payment required 82.47 hours of work per month, which is equal to a monthly payment rate of 3.1 minutes of work per square foot of housing.

By 2020, the median sales price of a house rose to $336,900. The mortgage loan interest rate, however, declined to 3.11%. A 30-year loan, then, required a monthly payment of $1,440.45. The average U.S. home size also increased to 2,261 square feet, indicating a monthly payment rate of $0.64 per square foot of housing.

In 2020, the average blue-collar worker’s hourly compensation rate stood at $32.54. Therefore, a $1,440.45 loan payment required 44.27 hours of work per month, which is equal to a monthly payment rate of 1.17 minutes of work per square foot of housing.

That means that the time price of a loan payment decreased from 82.47 hours of work per month in 1980 to 44.27 hours of work per month in 2020, or by 46.3%. Over the same period, the time price of a monthly loan payment per square foot of housing decreased from 3.1 minutes of work to 1.17 minutes of work, or by 62.1%.

Between 1980 and 2020, the nominal price of a square foot of housing increased by 268%. Over the same period, the average nominal blue-collar hourly compensation rate rose by 257%. As such, the time price of a square foot of housing rose from 4.44 hours of work in 1980 to 4.58 hours of work in 2020, or 3.1%.

 Note that our calculations are not adjusted for the higher quality of construction and finishes and energy efficiencies that are typically found in 2020 U.S. homes but were not present in 1980 U.S. homes. Also, note that over the last four decades the average household size decreased from 2.76 persons to 2.53 persons. The living space per household member increased from 578 square feet in 1980 to 894 square feet in 2020, or 55%.

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All in all, the time price of U.S. homes remained almost the same between 1980 and 2020. On average, blue-collar workers need to work 3.1% longer to earn enough money to buy a square foot of housing in the U.S. That small increase is surprising, given the spread of “not in my back yard” opposition by residents to new developments in their local areas and the additional regulatory burdens imposed at all levels of government on the U.S. housing industry over the last four decades.

Crucially, the 3.1% increase in the time price of a square foot of housing is more than offset by the 77% decline in the 30-year mortgage interest rate, which fell from 13.74% in 1980 to 3.11% in 2020. That reduction alone saves blue-collar workers 62.1% of work per square foot of housing.

The Nobel Prize-winning economist Vernon Smith argued that swings in interest rates explain the booms and busts in the housing market, which influence the general economy as well. Contrary to what your late-night infomercial might be saying, real estate is not just about location, location, location. It is primarily about financing, financing, financing.

This article first appeared in Forbes.

Blog Post | Adoption of Technology

The World Has Come a Long Way from Cesspits to Sanitation

The need to keep waste away from human contact may seem obvious today, but for millennia that was not the case.

Access to improved sanitation facilities

Most of us take modern restrooms for granted, but proper sanitation is a relatively modern phenomenon and is still far too rare in the poorest regions of the world.

The need to keep human and animal waste away from human contact may seem obvious today, but for millennia that was not the case. Before the emergence of the germ theory of disease, and the subsequent public health campaigns and construction of adequate sanitation infrastructure in most of the world, people and waste commingled – with catastrophic results.

Countless millions of people got sick or died from diseases such as diarrhoea, ascariasis (a type of intestinal worm infection), cholera, hepatitis, trachoma, polio, schistosomiasis and so on.

In due deference to our ancestors, it has to be noted that some cultures, such as ancient Rome, paid due attention to cleanliness. The Romans built numerous public baths, which were accessible even to the very poor for a nominal fee, and a sophisticated system of sewers that enabled Rome to grow and reach a population of over 1 million people around the start of the first millennium. That feat would not be replicated in Europe until London and Paris in the 19th century.

In general, however, standards of hygiene tended to be very poor. A typical urban dwelling had a cesspit underneath the house or next to it. That’s where human and kitchen waste accumulated and fermented. Inadequate drainage, irregular emptying and heavy rains could make the cesspit overflow and seep into the house. While discouraged by the city authorities, people often emptied their chamber pots into the streets below.

As Johan Norbeg of the Cato Institute wrote in his 2016 book Progress: Ten Reasons to Look Forward to the Future, “When pedestrians heard the shout of ‘Gardyloo!’ they ran for cover. This phrase, taken from the French for ‘Look out for the water,’ was your only warning that someone was about to throw their waste out of the window.”

In rural areas, people lived with their animals, including chickens and cows, and used both animal and human waste to fertilise their crops – an extremely dangerous practice compounded by the fact that people could go throughout much of their lives without ever washing their hands. That led to epidemics of disease as well as other unsavoury consequences.

The Jews, who sometimes died at lower rates than the rest of the populace thanks to the frequent washing of hands that is prescribed by Judaism, were often accused of witchcraft, persecuted and even killed.

The Black Death, which killed between 30 and 60 per cent of the European population in the 14th century, complicated matters further. According to some medical experts of the day, “once heat and water created openings (pores) through the skin, the plague could easily invade the entire body.” As such, even the rich and powerful tended to avoid bathing. Elizabeth I took a bath once a month, “whether she needed it or not,” but her successor, James I, only washed his fingers.

The Journal de la santé, which was kept for Louis XIV by his doctors from infancy until a few years before he died, described the king’s daily life in microscopic detail, but mentioned bathing only once. His magnificent palace of Versailles had no proper waste facilities and people relieved themselves where they stood – in the hallways, behind the curtains and in the gardens.

One 18th century observer noted that Versailles was “the receptacle of all of humanity’s horrors – the passageways, corridors and courtyards are filled with urine and faecal matter.” All that filth was an excellent breeding ground for vermin and disease that periodically decimated the rich and poor alike.

Today, poor sanitation is mostly limited to very poor countries. In sub-Saharan Africa, for example, a mere 30 percent of the population had access to improved sanitation facilities in 2015. That was an improvement on 1990, when only 24 percent did. In other parts of the world, progress was much faster.

In South Asia, which includes very populous countries like India and Bangladesh, the share of the population with access to improved sanitation rose from 20 to 45 percent over the same time period. Globally, it increased from 53 to 68 percent. That should only improve with Prime Minister Modi’s ‘Clean India’ project to build some 111 million new toilets in the space of just five years.

The United Nations’ aim of ending open defecation by 2030 seems quite optimistic for regions like sub-Saharan Africa and South Asia, but there is no apparent reason why East Asia, Latin America and the Middle East should not be able to reach the European level of 93 percent or even the North American level of 100 percent by 2030.

As in so many areas of human development, what was once the preserve of the rich West is now becoming commonplace all over the world, helping ever more people live richer, healthier, more hygienic lives.

This first appeared in CapX.

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Dead Wrong: Rent Control

I want to live in the city. You want to live in the city, but there are too few apartments. We need rent control to make it affordable for everyone, not just the richest. Nope, that’s Dead Wrong.