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.
4 According to the 2018 1-year American Community Survey.