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Old 05-19-2014, 03:26 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
Reputation: 6716

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Quote:
Originally Posted by anifani821 View Post
LOL - love that, Tuborg.

We could have a very lively discussion about this.

As I was thinking about costs back in 1970, it hit me . . . the price of gas alone has had a big impact on anyone commuting (whether to a job or to classes!)

If a dollar in 1970 would equate to $4.75 today (just a figure I found - not sure if that is accurate at all!), then a gallon of gas should cost under $2 today.

And think about computers and calculators and "color TVs." Remember how expensive they were even back then? A nice color TV in 1972 was $800, which was like 2 months of salary for the average guy!

Few credit cards were even available, then, either. There was layaway . . . and sometimes, "store financing."

So in discussing this comparison, one would have to consider commodities and how those prices have changed, too . . . hard to come up with an accurage snapshot comparing 1970 to 2014, as it isn't as simple as inflation/value of dollar or overall COL.

I bet someone out there has spent time doing such a study, though!
You're off. You'll need over $6 today to buy what $1 bought in 1970 - at least officially.

CPI Inflation Calculator

FWIW - official CPI understates increases in the cost of living. First - because of something called hedonics:

Hedonic Quality Adjustment in the CPI

Second - because of "substitution" adjustments (like if the price of a nice steak gets too high - the CPI assumes you're going to buy chicken thighs instead).

If you actually remember the price of something you bought back then - whether it's a car (I bought a nice new one in 1971 for $3k) or a can of tuna fish (I was paying about 19 cents a can back then) - you'll see you're paying much more than 6x more for many things. OTOH - the first computer I bought for my office in the 70's cost about $25k. And it had about 1/100th the computing power of a current smart phone (that's where hedonics comes into play). Robyn
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Old 05-19-2014, 03:45 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
Reputation: 6716
Quote:
Originally Posted by City__Datarer View Post
A common type of post on the Florida local forums is that someone wants to buy their retirement home now while they can in case prices go up even though they won't be retiring for several years.

Speaking as a Florida resident for over a dozen years, from my vantage point, while some benefitted financially from the volatility in prices over the last decade or so, for many people it has been disruptive and burdensome, not to mention having serious ripple effects on the larger economy (especially high unemployment and businesses closing). A lot of affordable housing was also lost. Titles became clouded, mold grew in non-air-conditioned homes sitting in the sun and humidity for years, some neighborhoods of modestly priced homes went into decline. I agree that many people don't want starter homes, but some of us do, and it's unfortunate that many starter homes here have been allowed to deteriorate and so aren't viable home choices any more.

This volatility is a loss to a way of life we were lucky to enjoy for a long time. I find it sad that the average person worries that they'd better time the purchase/sale of a home based on the ups-and-downs of a volatile market instead of being able to (without risking a big financial loss) choose to buy or sell when individual life circumstances (the need for a particular home at any given time) dictate. This volatility also means it is no longer automatic that the homeowner who uses their savings for a down payment and then pays for and maintains a home over years or even decades is the one to reap the rewards of any increase in its value.

I thought after all the upheaval and financial losses that affected so many people as a result of the last real estate boom-bust cycle (which hit my area of Florida particularly hard) that I could take my time in looking for a retirement home because this volatility would not soon be repeated. I agree that prices had gone so low that a correction was to be expected, but I (wrongly, it turned out) expected it to happen gradually. (I certainly wasn't seeing the kind of improvements in people's financial situations that would warrant big increases).

One of the reasons why I didn't see the big price increases (of early last year or so) coming is that I didn't recognize that, with market conditions that cause investors worldwide to be on the lookout for places to park their money and the ability for investors to easily (especially given the Internet) look at the whole global landscape of real estate prices and pick/execute their real estate investments from afar, real estate was no longer a mainly local business. I think we (in Florida and I suspect numerous other places) really have lost that connection between what real estate costs and what local residents (including not only owner occupants but also local people who intend to buy a home or several to rent out very long-term) are able to pay.

And I don't agree with the reasoning I often hear in Florida that if people are paying these prices in cash, the homes must be worth it. Prices went up in part because some of those "paying cash" were buying multiple properties with investors' money, where the decision maker was not the individual who'd personally take a loss if the purchase turned out to be a mistake, and so it really isn't the same as a market where prices go up because those paying cash are almost all local individuals buying their own home (or an investment property near where they live that they intend to hold for the very long term).

I don't have an opinion either way on whether the higher prices are sustainable. I just don't have a good enough understanding to feel I can predict anything. But I hope for the sake of average people's individual finances and the stability of neighborhoods that we don't have another boom-bust cycle; we still haven't recovered from the last one. But, to the extent that Florida is attractive to some retirees, who are a larger segment of the population now, and many are relocating from higher priced areas, possibly this won't be a repeat--although unfortunately things are tougher than they used to be before the bubble for people who need to finance a home on a typical Florida salary.

Something worth noting is, while I think the prices of many homes fell too low and did need correcting upwards, there are a lot of homes out there that anyone doing their homework would avoid, yet the asking price doesn't always reflect their condition. (It seems like they've been carried along in the general upward trend, perhaps because of lower inventory at certain price points.)

I'd encourage anyone planning to spend their money on a retirement home in Florida to really do their due diligence. Above all, there have been many foreclosures (and many homes on the market are flips of foreclosures), so make sure you aren't getting a problem home with just a superficial makeover. And definitely look into what's been going on with insurance costs/availability.

There are many things to look out for, but, that said, I think paying cash for a Florida retirement home can be a good strategy for some people if you pick the right house. I think there are still bargains to be had--both for people looking in the lower price ranges who are comfortable taking a chance on a condo for their retirement home (I've posted at length on other threads about why I think condos are financially risky, but they do work out well for some people although, again, you're taking a chance; I'm trying to decide myself whether to take a chance on a condo again or not) or for people who are fairly well off financially but not wealthy (particularly people who have homes with significant equity in high-cost-of-living places with high taxes that they want to sell in order to finance their purchase of a lower cost retirement home). But I recommend really trying to understand as much as possible, so that you get one of the true bargains. (When I say they are bargains, though, I don't mean I have any idea whether they'll appreciate or depreciate, but just that the numbers here may make a lot of sense for some people compared to staying in a higher home price and higher property tax area.)

The local Florida forums here on City-Data contain lots of helpful discussions for anyone thinking of buying a retirement home here.

And Ani: I agree with you about the psychological benefits of home ownership. (I wouldn't even be considering getting involved in a condo type of ownership situation again were it not for that.)
Very excellent message - especially when it comes to the Florida real estate market (and sorry - I can't rep you again). Which is a boom and bust market in many parts of the state - often on steroids or - OTOH - totally depressed.

And there's something you haven't mentioned. Which is the mentality of a lot of buyers these days. Heads I win - and tails you lose. Because I'll walk away from my financial obligations to not only the company that owns my mortgage - but to my condo association or HOA if I wind up underwater. And play jingle keys. We bought our first place in Florida during the '73-74 recession - and people sold for break even or losses then. But they didn't just walk away from their financial obligations and say "scr** you - chase me if you can". Which was sadly the case in the recent real estate bust. And not only in Florida. Robyn
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Old 05-19-2014, 03:52 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
Reputation: 6716
Quote:
Originally Posted by SOON2BNSURPRISE View Post
My parents cashed out back in 2003. They sold there home that they had been in for 38 years and paid cash for a home in Arizona and had a couple hundred thousand for retirement. Not bad when you consider my dad had a Navy retirement and a retirement from Southern California Edison plus Social Security. My mom who was a home maker also gets social security although she never "worked" outside the home.
So what happened to the value of the home in Arizona? My brother lives in Scottsdale - and his home value went down about 30%. Robyn
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Old 05-19-2014, 04:04 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
Reputation: 6716
Quote:
Originally Posted by MadManofBethesda View Post
But that's what happens when you try to extrapolate from your own limited anecdotal experience...
Perhaps the poster you're arguing with is guilty of that sin. But you probably are as well. Especially because you don't seem to know much of anything about your own personal condo financial situation (which can have a big impact in terms of your personal COL down the road). FWIW - I don't purport to know much of anything about places other than those where I live/have lived (and I haven't lived outside Florida for the last 40 years or so). Robyn
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Old 05-19-2014, 04:14 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,920,408 times
Reputation: 6716
Quote:
Originally Posted by RomaniGypsy View Post
...You and I both understand math, it seems, well enough to know that there are many variables. But if the general American population understood math that well, we never would have had a housing crisis to begin with. Thus, it cannot be assumed that the average American will think that much about the numbers. Hence, when talking with others whose mathematical comprehension is unknown to me, I tell them that they should figure on 1% of the purchase price monthly as their payment. If it turns out to be lower, great, then they have a cushion for those extra random costs of homeownership.
My basic rule of thumb is 10% of purchase cost annually. Somewhat lower than yours. And that doesn't include loss of income on equity invested. Depends if everything is new and under warranty - or if you have to spend more $$$ out of pocket for an older place - stuff like that. But 10% annually over an intermediate time frame (like 10 years) for an average place works for me. Robyn
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Old 05-19-2014, 07:37 PM
 
Location: State of Being
35,885 posts, read 67,141,087 times
Reputation: 22373
Quote:
Originally Posted by Robyn55 View Post
You're off. You'll need over $6 today to buy what $1 bought in 1970 - at least officially.

CPI Inflation Calculator

FWIW - official CPI understates increases in the cost of living. First - because of something called hedonics:

Hedonic Quality Adjustment in the CPI

Second - because of "substitution" adjustments (like if the price of a nice steak gets too high - the CPI assumes you're going to buy chicken thighs instead).

If you actually remember the price of something you bought back then - whether it's a car (I bought a nice new one in 1971 for $3k) or a can of tuna fish (I was paying about 19 cents a can back then) - you'll see you're paying much more than 6x more for many things. OTOH - the first computer I bought for my office in the 70's cost about $25k. And it had about 1/100th the computing power of a current smart phone (that's where hedonics comes into play). Robyn
$6 sounds more like it. I found the $4.74 figure online and it felt low to me . . .

My VW (new) in 1970 was right around $1800.

Yes, electronics are a different situation -- manufacturing processes have definitely had a huge impact on technology . . . I remember when LED (lights) were the thing and so expensive (as were any electronic gadgets that used them!)

Thank you for sharing the great info, Robyn!!!
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Old 05-20-2014, 01:45 AM
 
494 posts, read 879,968 times
Reputation: 1348
Quote:
Originally Posted by Robyn55 View Post
You're off. You'll need over $6 today to buy what $1 bought in 1970 - at least officially.

CPI Inflation Calculator

FWIW - official CPI understates increases in the cost of living. First - because of something called hedonics:

Hedonic Quality Adjustment in the CPI

Second - because of "substitution" adjustments (like if the price of a nice steak gets too high - the CPI assumes you're going to buy chicken thighs instead).

If you actually remember the price of something you bought back then - whether it's a car (I bought a nice new one in 1971 for $3k) or a can of tuna fish (I was paying about 19 cents a can back then) - you'll see you're paying much more than 6x more for many things. OTOH - the first computer I bought for my office in the 70's cost about $25k. And it had about 1/100th the computing power of a current smart phone [boldface added] (that's where hedonics comes into play). Robyn

Yes, the technology price drops are nothing short of amazing! I don't know if I'll ever get around to it, but learning video editing today costs next to nothing. Compare that to the 1970s cost! (Now if someone could please just invent a cheap time machine to go back and get the 19-cent tuna . . .)
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Old 05-20-2014, 02:19 AM
 
71,471 posts, read 71,652,652 times
Reputation: 49058
think about the fact a pencil cost 1 days wages back in the early days ,today a few minutes of work . a bicycle about a weeks wage .

think about the fact in the 1800's one ounce of gold bought a good mans suit and a pair of shoes. know what one ounce buys today? a good mans suit and a pair of shoes.
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Old 05-20-2014, 04:14 AM
 
649 posts, read 553,815 times
Reputation: 1877
Not sure you can have this discussion without the context of what the average income was, about 8k dollars. Today, it's about 44k dollars. Also, inflation in 1974 was over 11 percent annually.
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Old 05-20-2014, 08:50 AM
 
Location: State of Being
35,885 posts, read 67,141,087 times
Reputation: 22373
Quote:
Originally Posted by MG120 View Post
Not sure you can have this discussion without the context of what the average income was, about 8k dollars. Today, it's about 44k dollars. Also, inflation in 1974 was over 11 percent annually.
Actually, average income in 1970 was $6186.24.

Anyone making $20K a year was considered "rich." Remember: $20K could buy a 2000 + sq. ft home with a full basement on 1/2 acre (where I lived in NC) in 1970.

I had stated earlier that the minimum wage was $1.60 b/c that is what I remembered. Actually, the minimum wage in 1970 was $1.45; it went up to $1.60 in 1971.

1974 was a different beast . . . we were in a recession.

http://www.ssa.gov/oact/cola/AWI.html
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