Was there a time when the middle class could afford Manhattan or SF?

[Dan]

Was there ever a time when someone making a middle class-level income -- a planner, for instance -- could afford to rent a nice apartment in Manhattan, or even buy a condo or co-op?

I'm wondering the same thing about other now-pricey cities in the US too. When was the last time a middle-class family could buy a decent house, equivalent to what a middle-class family most anyplace else in the country could get, in a good neighborhood in San Francisco, Boston or the DC area? If I was a planner making $15K a year in 1975, could I afford to buy a decent house in Fairfax County, Brookline or Daly City, or a middle-end co-op in Manhattan?

[jordanb]

The cost of housing in the United States has been rising faster than inflation for many years now. I can't speak for San Francisco or Manhattan but I can say that in Chicago, most of the out-of-reach neighborhoods were very affordable 15-20 years ago. I know that because I know people who bought into them, or who had the option to buy into them in the 1970s-1980s but didn't take it.

One thing though: a conventional "traditional" mortgage is becoming increasingly unrealistic for the average people because so many "average" people are willing to risk "unconventional" financing instruments like interest-only mortgages. This drives the price point up because they're able to leverage those instruments to pay much more for a house than they’d manage with a traditional mortgage. Thus, people who are more conservative and who insist on a 30 year 20/80 fixed-rate mortgage are priced out of the market.

[PlannerGirl]

Yes apparently until about 7-10 years ago a planner could buy a nice house in the DC area (not the uber nice areas but not a slum) Now folks commute from Pa and W Va I make more than the national average for a family of 4 but qualify for low income housing here

[Planit]

In the mid-80s, I was making 15k as a entry-level planner (west coast of Florida)and basically left that city because we were going broke. We lived in an apartment complex close to the airport and was clean, middle class. Couldn't even think of buying a home.

[michaelskis]

Without getting into debt, it is hard for many middle class individuals to buy a house in a good neighborhood.

$150,000 with 20% down for 15 years at 6%, the payment would be $1,013.00, If your take home is only $2,500 (about $40,000 a yr), the house payment would be 41% of your income, and you would end up paying back a total of $182,340.

You can’t get rich with numbers like that.

[PlannerGirl]

I wish a home here were 150,000 you cant get a rat hole for that condos are easy 300,000 now

[jordanb]

^-- Right. Someone isn't going to become rich with michaelskis's numbers but they're not going to be poor either. They get all the tax breaks of homeownership and in 15 years they'll own their home if they don't get on the refinancing treadmill. Also the montly payments can be almost halved by shooting for a 30 year traditional mortgage.

The problem is that 150,000 buys nothing in all but the coolest markets today. That might get you a bungalow in a blue-collar neighborhood in Chicago. For a two bedroom condo downtown, you'll easily be shelling 300,000+. Even more in the trendy neighborhoods.

If it weren't for the tax breaks, it'd make far more sense to rent in today's market.

[Queen B]

Life is good in the Midwest!!!
Just as I have said before...
We can live good in decent places and don't have to deal with traffic and smog.

[Dragon]

Housing prices are increasing here in the south also. In the suburbs outside of the city limits, housing costs are starting around $100K for the ok neighborhoods. Nice neighborhoods are >$300K without a house. This was before Katrina, now people are getting more then their asking price for homes.

With my student loans and my car note, i can't afford a note over 500 a month. I guess I'll have to stick to apartments fot the time being. Big down payment needed

[the north omaha star]

Life is good in the Midwest!!!
Just as I have said before...
We can live good in decent places and don't have to deal with traffic and smog.

Only in the small rural towns. Places like Omaha, KC, Minny housing prices are rising there too. I think that some of the blame can be placed on people form either coast moving there because they're getting priced out where they are from.. My wife and I thank our lucky stars every day that we were able to get a fully rehabbed spacious home 10 minutes from either of our job for less than $200K in Baltimore.

[otterpop]

I guess my question is: Is there anywhere where a planner's salary is enough to comfortably afford a house?

Sure, housing in the Helena Valley is affordable. But a planner here has a salary that is lower than what a planner makes in the East, California, Oregon, etc. So my house in town that cost me $101,000 is relatively inexpensive compared with other places, but my salary still takes a big bite every month when I pay that mortgage payment.

[jaws]

You could have easily afforded a town house in Harlem back in the 70's. Not because pay was higher, but because law-abiding folks avoided Harlem like the plague. Now the professional class folks who have been priced out of everywhere else in Manhattan are moving into formerly "affordable" neighborhoods and driving up prices. The same is true of San Francisco.

Let's face it, the surviving American cities have become enclaves for the wealthy. If you're not in finance or law, you can't afford to live there. And pardon me for being disingenuous, but isn't building more of these cities, thus making them affordable to regular people, your job? Maybe that's why you are so poorly paid.

[michaelskis]

^-- Right. Someone isn't going to become rich with michaelskis's numbers but they're not going to be poor either. They get all the tax breaks of homeownership and in 15 years they'll own their home if they don't get on the refinancing treadmill. Also the montly payments can be almost halved by shooting for a 30 year traditional mortgage.

The problem is that 150,000 buys nothing in all but the coolest markets today. That might get you a bungalow in a blue-collar neighborhood in Chicago. For a two bedroom condo downtown, you'll easily be shelling 300,000+. Even more in the trendy neighborhoods.

If it weren't for the tax breaks, it'd make far more sense to rent in today's market.

So, lets see, if your in debt, you will save your self $3,000 in taxes by sending the bank $10,000 in interest. That is not a trip that I want to go on. (Typical 30% tax bracket for a 30 year mortgage)

As the 30 year mortgage, the payments would be $719 per month, or about 30% less. But that would be under the same 6%. A 15 year mortage will have a better interest than a 30. Additionally with the same calculations, $150,000 with 20% down (finance $130,000) for 30 years at 6%, when all is said and done you would end up paying back a total of $258,840.00... or just short of twice what you took out to finance.

That is $76,500 more than the 15 year mortgage if you where able to keep the same rate. That is almost twice the yearly family income ($42,000)

Personally, I like to keep the money in my pocket, and not have to give it to the bank.

[mgk920]

I can't help but think that a lot of that out-of-sight priciness is artificially created, mostly or entirely due to local zoning laws that make it illegal for developers to provide the units that the respective local markets are demanding.

I feel like a broken record (man, does that cliché date me! ) whenever I think or say that, but I cannot come up with a better explanation for the root cause of this problem. Simply put, there are more people wanting units in those areas than there are units being made available.

Mike

[dobopoq]

What's ironic is how the lower east side used to be teeming with impoverished immigrants. You would think the higher the population density the higher the cost of living. But a quick view of this data from wikipedia shows Manhattan's population density in the 1910's was about 80% more than that of today.

Population trend
Year Inhabitants
1790 33,111
1800 60,489
1810 96,373
1820 123,706
1830 202,589
1840 312,710
1850 515,547
1860 813,669
1870 942,292
1880 1,206,299
1890 1,515,301
1900 2,050,600
1910 2,762,522
1920 2,284,103
1930 1,867,312
1940 1,889,924
1950 1,960,101
1960 1,698,281
1970 1,539,233
1980 1,428,285
1990 1,487,536
2000 1,537,195

Because there are fewer people in the average household today, the cost of living has actually gone up in Manhattan. This despite the fact there are taller buildings and more total residential square footage today than in the 1910's. Presumably, Manahattan was more affordable in the 1910's than it is today, but let's not forget that this is perhaps the negative side effect of the public health movement that raised the minimum level of acceptable living and working conditions. We can romanticize about how cities might have been more affordable in the past, but not without a culture where people's standards for personal freedom weren't as demanding as those of today. Of course now, the huddled masses of New York's non-English speaking immigrants are more likely to be ghettoized in certain ethnic pockets of the less space-scarce suburbs thanks to the age of the automobile and its culture of compulsory driving.

[tsc]

I think you have to be my parents generation to have afforded Manhattan. They have friends who bought brownstones in the 50's. One friend, who was a nurse, lives in a rent controlled on Washington Square for $300/month!

I think you could have afforded Brooklyn or Queens in the 90s. Now you might be able to buy a condo in the Bronx...but you will have to work in Westchester...NYC pays crap to planners.

5 years ago you could get a starter home for 200k by me...now the median home is 700k...with 'starters' being over 400k. We have a real hard time keeping planners, even though our salaries are much higher then the rest of the state.

[BKM]

You could have easily afforded a town house in Harlem back in the 70's. Not because pay was higher, but because law-abiding folks avoided Harlem like the plague. Now the professional class folks who have been priced out of everywhere else in Manhattan are moving into formerly "affordable" neighborhoods and driving up prices. The same is true of San Francisco.

Let's face it, the surviving American cities have become enclaves for the wealthy. If you're not in finance or law, you can't afford to live there. And pardon me for being disingenuous, but isn't building more of these cities, thus making them affordable to regular people, your job? Maybe that's why you are so poorly paid.

But jaws, I thought libertarians like yourself believe that THE MARKET can do everything? Wouldn't your solution be to eliminate government planning (and those oh so costly salaries) altogether to miraculously create San Franciscos across the country?

[jaws]

But jaws, I thought libertarians like yourself believe that THE MARKET can do everything? Wouldn't your solution be to eliminate government planning (and those oh so costly salaries) altogether to miraculously create San Franciscos across the country?

No government planning doesn't mean no planning, it means for-profit planning. That's true in any industry, not just town-building.

[Wulf9]

San Francisco has some beautiful neighborhoods that were once middle class housing (the Avenues are a good example).

One of the main components of housing prices is government subsidies. When the Fed dropped interest rates, the same payment in 2004 would buy a house costing 30-40% more than in 2000. The interest rate drop allowed the u.s. to avoid a recession, but also added one third to the cost of housing based on payments. Add tax subsidies (deductions for interest and state taxes), ability to transfer capital gains, and, in California, property taxes based on date of purchase, and you have a housing costs that are divorced from normal "market" forces.

So, how do people afford houses? They use unearned income from previous house ownership to pay the increased costs of their next house.

A recent study in Sonoma County showed that the average adult income is $45,000 and the average adult income if you consider house appreciation as a portion of that income is $75,000.

So, old folks with houses are in good shape. Young folks without houses get to subsidize the old folks.