The average home has been steadily increasing in size and number/quality of amenities for generations. The 800 sq. ft. homes that had one electrical outlet in each room and where people once raised eight or nine kids gave way to much larger homes by the time I was a kid. My parents still live in the rambler they built 45 years ago. It has 1100 sq. ft. up and down (for a total of 2200). We had only one bathroom until Dad added a second one when he finished the basement during my early teen years. Still, my folks raised five kids in that home and we didn’t feel deprived.
This Gainesville Sun article reports that the average home size has grown roughly 20% over the past decade and a half, while the average number of dwellers per home has decreased slightly over that same period. (Also see this Zillowblog post.) We are getting more floor space for fewer people. The Kaysville, Utah family of five featured in the G-Sun article is upgrading from a 2100 sq. ft. home to a 5700 sq. ft. home. They essentially say that they need the space because they’ve got more stuff than people used to have. The G-Sun article says, “In much of the country, the growth in big houses is fueled by suburban homebuyers seeking luxury, rather than big families needing space….”
The average family’s mortgage debt-to-income ratio has increased pretty much directly proportionate to the increase in average home size. Clark Howard reported on his 10/12/07 show (see here) that over one generation, “Mortgage debt has risen 50 percent, while the average size of a home has risen 50 percent!”
It isn’t necessarily the cost of the amenities we are adding to our homes that is at the root of our mortgage debt increase. The real cost of better stuff has steadily decreased over time to make it more affordable. (See this Money Magazine article for some interesting insights.) A big plasma TV today is no more expensive in real terms than was a basic b/w TV set in 1960. But it requires a lot more space, so we build bigger and more opulent homes, which demand bigger and more oppressive mortgages.
An interesting feature of our economy is that this constant push for bigger homes affects everyone. A spokesman for the National Association of Home Builders reports, “You cannot sell a new home today with 1½ bathrooms,” which was the average home in 1970. “Even if only two people are in house, they still want 2½ to three bathrooms.” In other words, housing expectations have increased across the board, even among the poorer classes. So everyone, including the person that rents, is affected.
This would all be fine if housing costs as a percentage of family income had remained steady. But that’s not the case. Total family compensation has increased dramatically during my lifetime, mainly due to the increase of two-earner families and the increase of employment benefits. (Wages not including benefits have remained roughly stagnant.) But for all this added income, a greater percentage of it is going to mortgage debt than when we had single-earner families with fewer employment benefits. We are using this increased debt to fund bigger, nicer houses with a lot more stuff.
Our economy is presently structured to get people into debt early and then keep them there. During my lifetime, demand for debt instruments has exploded and the market has responded with increasingly easy credit. Median household debt from all sources has increased 1200% since I was a child. That’s a good way to get lots of stuff before you have to pay for it, but it’s not a good way to have peace of mind.
It is possible to have the peace of mind of minimal or no debt, but it requires a lot of dedication and a willingness to be satisfied with less stuff than your income peers. This kind of peace does not fall from the sky. It requires serious focus and effort. It requires swimming against the current of what everyone else is doing. Thanks to many blessings, my wife and I have been able to manage our household of seven on a single income for many years, which is certainly not what most others are doing. Lower cost, low debt living is not easy. But it’s worth it.