Cost of Living – 1973 vs. 2008 – Things aren’t that bad!
So, I got to thinking – what would it have cost to live in 1973 during the biggest recession since WWII, and how does that compare to the current state of the economy?
Here’s a little list I’ve put together researching off of the internet – using Google as a search engine to find my results – please note, These numbers are reliable – but not guaranteed, they’re just results I found online.
|Item||Price in 1973||Price in 2008|
|1 gallon of gas||40-50 cents||$3.89-$4.09|
|Average miles per gallon||13||23|
|Federal minimum wage||$1.60 per hour||$5.85 currently, $6.55 on July 24|
|Average home price||$32,500||$206,200|
|Average family income per year||$12,900||$51,765 in LHC according to The Shops at Lake Havasu’s marketing brochure|
|Average monthly rent||$175||$850|
|A dozen eggs||45 cents||$2.59|
|Prime rate||9.25% to 10%||6.5% now down to 5%|
|Mortgage interest rate||8.82%||6.04%|
What does this all mean?
In 1973, you’d have to work 18.75 minutes to buy a gallon of gas. You could travel 13 miles in an average car on this much gas. On July 24, 2005 you’ll have to work 35.6 minutes to buy a gallon of gas. You can travel 23 miles in an average car on this much gas. In order to travel the same distance, you would have had to work 33.17 minutes to buy enough gas to get you as far in 1973 as you can get on a gallon of gas in 2008. So with all of the bad media about fuel prices – the difference over the course of 35 years is an inflated rate of 6.83 percent over 35 years – or 1/5th of a percent per year! I don’t know about you, but I’d quit working if the only raise I got each year was 1/5th of a percent!
In 1973 a house cost $32,500 with an average family income of $12,900 – An average house in 1973 cost approximately 2.5 times the yearly family income. Now in 2008, a house costs about $206,200 on average. With our average household income of $51,765 in Lake Havasu – that’s about 4 times the yearly family income. That might seem out of whack – but we must also note - the average price of homes is almost 16 times more expensive than it was 35 years ago – that’s sure a strong investment! Your home really is a great long term investment!
I’m estimating an average rent of $850 dollars per month in Lake Havasu City. This is 4.85 times as much as it was in 1973. If a house is worth 16 times as much as it was 35 years ago – and the cost to rent a house is 5 times as much as it was 35 years ago, it’s truly a smarter investment to put your dollars into something that will appreciate in value 16 times instead of being 5 times more expensive with no return on investment EVER. Renting doesn’t pay off anyone but the landlord.
With Inflation at 3.94 percent in 2008 versus 6.16 percent in 1973 – we’re inflating at a lower rate currently so our dollar will still be worth more tomorrow.
Mortgage interest rates were 8.82% in 1973 – while they’re only 6.04% currently. Look at what things were in 1981 – mortgage interest rates were in the high teens to almost 20%!!! Things are definitely nowhere near that bad.
So, my advice: Quit listening to the media! Quit believing the doomsdayers! The outlook for America is bright – and we’re actually still living in better times than ever before. And, if you don’t realize that right now is the time to be investing in real estate while we’re either near the bottom or at the bottom – you’re going to be saying “woulda, shoulda, coulda” when things are back at the peak!