I just read some data, comparing the cost of living in 1965, compared to today. Interesting, how some things are cheaper, relatively, today, and somethings, more expensive.

Housing costs more, even after adjusting for inflation, than it did, 41 years ago. Incomes have not increased as much, so housing takes more, percentage-wise.

None of these numbers really tell us a lot, though, in abstract. There are too many variables to draw conclusions.

(For one thing, the number of dual-income households has increased, dramatically, so we really should be looking at housing costs as a percentage of household income, not personal income. But, I don’t have that data available.)

In 1965, there was 63% homeownership in the United States.
In 1990, there was 63% homeownership in the United States.
In 2005, there was 69% homeownership in the United States.

In 1965, the 5-year Treasury Note yielded approximately 4.72%.
In 2006, the 5-year Treasury Note yielded 4.50%.

(I couldn’t find historical data for the 10-year Note.)

In 1965, the interest rate on a 30-year fixed rate mortgage loan was approximately 5.98%.
In 2006, the interest rate on a 30-year fixed rate mortgage loan was 5.76%.

In 1965, milk cost $1.06 a gallon.
In 2006, milk cost $2.98 a gallon. (up 2.8x)

In 1965, a loaf of bread cost $.21.
In 2006, a loaf of bread cost $1.20. (up 5.7x)

In 1965, a postage stamp cost $.05.
In 2006, a postage stamp cost $.39. (up 7.8x)

In 1965, a gallon of gas cost $.26.
In 2006, a gallon of gas cost $2.69. (up 10x)

In 1965, a Ford motorcar cost $3,500.
In 2006, a Ford motorcar cost $28,000. (up 8x)

In 1965, the average home cost $16,000.
In 2006, the average home cost $220,000. (up 13.75x)

In 1965, the average personal income was $7,000.
In 2006, the average personal income was $44,800. (up 6.4x)

What does this tell us?

In 1965, the average monthly income was $583.33.
In 2006, the average monthly income was $3,733.33.

In 1965, the average monthly mortgage loan payment was $95.72 (16.4% of average personal income).
In 2006, the average monthly mortgage loan payment was $1,285.26 (34.4% of average personal income).

In constant dollars, a home costing $16,000 in 1965 would cost $103,139, today.

Source material: Happy Birthday Homeowners! - By Chris Palmeri, Business Week Online

Further reading: Recent Trends in Homeownership (study of causes of increase in homeownership, over the past decade, .pdf) - By Carlos Garriga, William T. Gavin, and Don Schlagenhauf, Federal Bank Reserve of St. Louis, September/October, 2006