If you're interested in learning more about personal finance, investing, or business, check out my Substack. I provide more detailed information about data and statistics to support my arguments in specific articles in my publication: https://securesingle.substack.com.
Thanks again for the collaboration and discussion, Dr. Jane.
As my father used to put it, we spend too much time keeping up with the Jones. Not Joe Jones who lives down the street, but Chipper Jones. (A little Braves humor.)
I think people can’t settle for “just right” sized homes anymore. I know I’m guilty, but I remember our realtor showing us wonderful 2400 sq ft homes in the late 1980s. With interest rates over 11 percent, there was just no way.
I'm not saying that people need to have large homes and keep up with the Joneses; I'm pointing out the rising costs resulting from inflation that affect the average person.
Following the most basic financial rule for buying a home with a mortgage, the mortgage should be no more than 30% of someone's monthly income.
That becomes very difficult, if not impossible, when the average price of a home in the United States is now $450,000.
It is true that we face rising home costs. But isn't home price, or shelter inflation also has something, or much, to do with demand?
Nikki is in a better position than I to comment on this and enlighten us. Not being an economist myself, just from my basic understanding of economy, if demands are trending toward larger houses, that will be one driving factor for the "average" houses price going up, i.e., shelter inflation, correct?
So due to demand trend, the "average" house size keep getting bigger and bigger (as the cited graph showed), it is logical that, just by this factor alone, the price of the "average" house will rise higher and higher too.
But demand does not equal to necessity. Demand could be driven by social mentality or "keep up with the Joneses" too. Most families actually don't need an "average"(over 2500sf) size house in the U.S., but "want/demand" to...., This gets many (unnecessarily) stressed by the $450k price tag.
Or if (say, in a paralleled reality) , we all only go by the size of our need/sufficiency, the average house size will drop, maybe by half; then the "average" house price might soon drops too, if not by half, significantly too, due to the reduction in demanded size. Wouldn't that be much more affordable and less stressful? : )
I know this doesn't fit today's reality (But maybe today's reality is the problem?). I know it fits our well-being needs better.
You're mixing up two different concepts: Inflation and home square footage.
Buyers and sellers determine the market demand. That is how the economy and market work. However, rising home prices are the result of various economic factors, including inflation, currency devaluation (which requires more money to purchase the same house), and increased demand.
A house priced at $450,000 in the United States. That will give you less square footage in New York City versus Oklahoma. It's not a large house like the graph you added to your article.
Where I live, many houses that require major renovations, measuring 1,200 square feet or less, sell for around $250,000. You can purchase a 700-square-foot home in the town where I live for $ 300,000-$400,000. It's the basic rule of real estate: location, location, location.
It's now becoming increasingly difficult for people with an average income in the United States, around $60,000, to afford a home. They become forever renters. The only people who can afford a home are people who make six figures or more. Hence, my emphasis on the need for people to increase their incomes and net worth.
The bottom line is that inflation and currency devaluation make people's money worth less, so they need more to buy the same goods and services, like a house, compared to previous generations.
For inflation in general, yes, goods and services cost more in the U.S. But the median household income increased even faster, comparing between this and previous generations. So our household purchasing power has actually been increasing, even after adjusting for inflation.
A quick search came back with these data (covering roughly three generations):
Real Household Income Over Time (Adjusted for Inflation) in the U.S.- -
Year: Median Household Income; Adjusted to 2025 Dollars; Purchasing Power
1960: ~$5,600; ~$58,000; Could afford basics, but limited discretionary spending
We are however mainly talking about shelter inflation, or, the rising of “average home” price, which is more directly related to home square footage. Since the “average home” is getting larger and larger, plus the rising per square footage cost, of course the “average home” cost is rising.
I do notice that the $450,000 average home price you cited is for the whole U.S., which roughly corresponds to the average house size of over 2500 sq ft in the country.
In NYC, the average price is much higher, and the size smaller. But in much of the U.S., the average size, and the associated price tag, are way more than most families NEED to deal with. Most of us could live with sufficient space in much smaller house with much lower costs.
If you're interested in learning more about personal finance, investing, or business, check out my Substack. I provide more detailed information about data and statistics to support my arguments in specific articles in my publication: https://securesingle.substack.com.
Thanks again for the collaboration and discussion, Dr. Jane.
You are very welcome James. Thanks for your extensive efforts in this collaboration!
As my father used to put it, we spend too much time keeping up with the Jones. Not Joe Jones who lives down the street, but Chipper Jones. (A little Braves humor.)
I think people can’t settle for “just right” sized homes anymore. I know I’m guilty, but I remember our realtor showing us wonderful 2400 sq ft homes in the late 1980s. With interest rates over 11 percent, there was just no way.
I'm not saying that people need to have large homes and keep up with the Joneses; I'm pointing out the rising costs resulting from inflation that affect the average person.
Following the most basic financial rule for buying a home with a mortgage, the mortgage should be no more than 30% of someone's monthly income.
That becomes very difficult, if not impossible, when the average price of a home in the United States is now $450,000.
It is true that we face rising home costs. But isn't home price, or shelter inflation also has something, or much, to do with demand?
Nikki is in a better position than I to comment on this and enlighten us. Not being an economist myself, just from my basic understanding of economy, if demands are trending toward larger houses, that will be one driving factor for the "average" houses price going up, i.e., shelter inflation, correct?
So due to demand trend, the "average" house size keep getting bigger and bigger (as the cited graph showed), it is logical that, just by this factor alone, the price of the "average" house will rise higher and higher too.
But demand does not equal to necessity. Demand could be driven by social mentality or "keep up with the Joneses" too. Most families actually don't need an "average"(over 2500sf) size house in the U.S., but "want/demand" to...., This gets many (unnecessarily) stressed by the $450k price tag.
Or if (say, in a paralleled reality) , we all only go by the size of our need/sufficiency, the average house size will drop, maybe by half; then the "average" house price might soon drops too, if not by half, significantly too, due to the reduction in demanded size. Wouldn't that be much more affordable and less stressful? : )
I know this doesn't fit today's reality (But maybe today's reality is the problem?). I know it fits our well-being needs better.
You're mixing up two different concepts: Inflation and home square footage.
Buyers and sellers determine the market demand. That is how the economy and market work. However, rising home prices are the result of various economic factors, including inflation, currency devaluation (which requires more money to purchase the same house), and increased demand.
A house priced at $450,000 in the United States. That will give you less square footage in New York City versus Oklahoma. It's not a large house like the graph you added to your article.
Where I live, many houses that require major renovations, measuring 1,200 square feet or less, sell for around $250,000. You can purchase a 700-square-foot home in the town where I live for $ 300,000-$400,000. It's the basic rule of real estate: location, location, location.
It's now becoming increasingly difficult for people with an average income in the United States, around $60,000, to afford a home. They become forever renters. The only people who can afford a home are people who make six figures or more. Hence, my emphasis on the need for people to increase their incomes and net worth.
The bottom line is that inflation and currency devaluation make people's money worth less, so they need more to buy the same goods and services, like a house, compared to previous generations.
For inflation in general, yes, goods and services cost more in the U.S. But the median household income increased even faster, comparing between this and previous generations. So our household purchasing power has actually been increasing, even after adjusting for inflation.
A quick search came back with these data (covering roughly three generations):
Real Household Income Over Time (Adjusted for Inflation) in the U.S.- -
Year: Median Household Income; Adjusted to 2025 Dollars; Purchasing Power
1960: ~$5,600; ~$58,000; Could afford basics, but limited discretionary spending
1995: ~$34,000; ~$71,000; Improved affordability, growing middle-class comfort
2025: ~$80,610; ~$80,610; 13~15% higher household purchasing power than 1995.
The data accuracy needs verification, but the general trend is correct. Also see the same trend in the graph in https://drjaneforhappiness.substack.com/cp/161477556
We are however mainly talking about shelter inflation, or, the rising of “average home” price, which is more directly related to home square footage. Since the “average home” is getting larger and larger, plus the rising per square footage cost, of course the “average home” cost is rising.
I do notice that the $450,000 average home price you cited is for the whole U.S., which roughly corresponds to the average house size of over 2500 sq ft in the country.
In NYC, the average price is much higher, and the size smaller. But in much of the U.S., the average size, and the associated price tag, are way more than most families NEED to deal with. Most of us could live with sufficient space in much smaller house with much lower costs.
Hope this is more clear?
I agree. Shelter inflation is still popping up in the reports. Unfortunately those prices tend to be very sticky.