(865) 357-7370 kim@sdp-planning.com

MANAGING YOUR MONEY LIKE IT’S THE 50’S

Many Americans still believe that paying off their home or sending extra mortgage payments each month is a good idea. At one time, it might have been, and in some instances today it might be, but when a person considers today’s world, “renting from the bank” might make more sense.

“But all of that interest!”
Paying off a home comes from what I think is 1950’s thinking. America had just come out of the Great Depression, then World War II trauma and rationing, so owning a home provided security. More importantly, in those days a person COULD AFFORD to pay off their home with a variety of reasons why they wanted to:
• The median home price in the 50’s was $7,354 (1) equivalent to about $79,000 in 2022
• Monthly housing cost was about 22% of the annual budget
• Homes were much smaller at less than 1,000 square feet, one bath, kids shared a bedroom
• People tended to stay in their home for a long time, sometimes the rest of their lives.
Compare that data to today and one can easily see why it might not make sense to pay off your *current home:
• Median home price in 2022 is roughly $400,000 (2)
• Monthly housing costs average 44-50% of the annual budget
• Average square footage in America today is about 2,300 square feet (3)
• In 2020 the average family lives in a home for about 13 years (4)

In my next write-up, “You Can’t Eat Your House” I’ll detail the actual numbers that show why many would be better served not paying off their home or sending extra payments.
1 https://dqydj.com/historical-home-prices/
2 https://www.fool.com/the-ascent/research/average-house-price-state/
3 https://www.census.gov/construction/chars/highlights.html
4 According to the 2018 1-year American Community Survey.