Businessweek Archives

Happy Birthday Homeowners!


? Pimco's Take On Rates |

Main

| Merrill Lynch's famous chart isn't as bad as it looks ?

September 25, 2006

Happy Birthday Homeowners!

Chris Palmeri

Every year at about this date I get a card from my insurance agent wishing me a happy birthday. It would be a nice personal touch if the computer-generated card didn't leave off the r in Christopher, giving my first name a European flair completely absent from me in real life. The card always contains some trivia from the year of my birth--minishirts and the Ford Mustang debuted in 1965! One of the most interesting parts of the card is a price comparison of key items from then and now. A gallon of milk has gone up threefold in the past forty-one years (from $1.06 to $2.98), a loaf bread six times (21 cents to $1.20). You may curse the U.S. Postal Service and the oil companies every time you fill up your tank or have to deal with a new postage stamp increase, but they've gone up in price only seven (for the stamp) and ten times (for gasoline). Even the price of that new Ford has gone up only eight times, from $3,500 to $28,000 over the years. The big winner when it comes to price increases? The three-bedroom home. It's gone from $16,000 to $220,000 over the past four decades. That's a nearly 14-fold increase, and one that blows away the increase in population (50% to 300 million) and average personal income (a six-fold increase from $7,000 a year to $44,800). Read into those numbers what you will. In the mean time, Happy birthday Homeowners! You've made the best investment you could make over the past forty-one years, at least according to my insurance agent.

01:29 PM

TrackBack URL for this entry:

http://blogs.businessweek.com/mt/mt-tb.cgi/

Another case of technology used in the wrong way and not personalized. The sooner marketers and salespeople come to term with this, the better it will be for everyone.

I am technology inclined and spell my real name the way it was giving to me, Nicolas. I get a lot of Nicholas. It doesn't bother me but I sure don't look at these companies as being really on top of things either.

Posted by: Nick at September 25, 2006 07:55 PM

Great San Diego Housing Flip site

http://thisoldhouseflip.blogspot.com

Posted by: anonymous at September 26, 2006 01:51 AM

Seems like the better comparison would be the consumer price index, which puts the value of a 1965 dollar at about $6.30 today. If incomes are up six times, our buying power is about the same. Milk is actually cheaper than it was back then (thanks to subsidies?), and bread is about the same.

But when you're looking at cars and houses, remember those products have changed a lot in 50 years. Cars are much better designed and built and will last two or three times longer than they used to. We may be paying a little more in relative terms but a modern car is a much better value. Houses are much bigger than they used to be, and the land they are built on is more scarce.

I would be interested in knowing how much the average 1965 home has appreciated over time -- I would guess it's not anything close to 14 times. And don't forget all the money that goes into maintenance, property taxes, etc.

Posted by: matt carter at September 26, 2006 02:15 PM

The most important thing that happened in 1965? The creation of the Department of Housing & Urban Development (HUD), of course!

Posted by: John K at September 27, 2006 12:38 AM

Don't know about 1965 - but my parent's home was built in 1958 - they paid $52K in 1967. Zillow has it valued at $851K while the tax assessor has it valued at $845K. By the way, in 1999 their house was only worth $410K. Their taxes are up to $14K while houses around the corner built in 2001 are twice the square footage on same 1/3 acre and taxes ~$20K. Not much of a tax gap - but people that bought in 2001 paid $600-800K and they are now "worth" over a million. Lots of for sale signs. The median income is ~$130K in the town - but that doesn't buy an 800K house.

Posted by: myheen at October 1, 2006 03:50 PM

Hi Chris!

Found your blog! Ok, I'll bite: The funny thing about name misspells is I can always tell who's selling my personal info to marketers by the way the envelope is addressed. I've had some crazy last name misspells out there, most recently "Jackie Dolls." LOL. I guess those machines are only "huuuu-man." :-)

cheers

jax

Posted by: jackie at October 3, 2006 06:13 PM


China's Killer Profits
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus