Do today’s homes include a golden key that also works with the handcuffs?

I learned an interesting fact today*.  I learned that 50 years ago families used to put 40% down on their houses and payments used to average 9x comparable annual rent.  Mortgages used to be like car loans, with average lengths between 5 and 15 years. The homes were much smaller in the 50’s (see graph or go to the oldest neighborhoods in your town to see what I mean)

Today the most conservative families only put down 20% to avoid PMI (such as myself) and the rest do 3% or 5% or before the sub-prime meltdown they would even put in negative amounts borrowing 105-120% of the sale price.

What this tells me is that home valuation increases will be lower in the next fifty years than they have been in the past fifty.  This is because people can’t extend mortgages beyond 30 years and we may even see a trend towards shorter mortgages, smaller houses, and overall lower quality of life as measured by what sizes houses we as a population own.

This information dovetails nicely with the Plight of the PIC in several areas.  This trend towards growing the size of homes is being reversed but even still the expectation for ‘reasonable’ is actually a cultural golden handcuff, or a major component of a PIC’s life that leads to the handcuff.

There are several escape routes to being a PIC, a subject we haven’t touched on yet in our ongoing narrative on Professional Individual Contributors.   Maybe reconsidering the home you have is one of them.

*This post was originally written in 2012  for another blog and revised in 2015 for this one.