Finances in the Golden Era and today

[Paisley]

In rural areas where land is cheap and people are handy, people built their own houses. My grandfather cut trees on their farm and laid them up for a season before sending them to the mill to use for timber to build his house.

My grandfather didn't build his own house, but bought a small house and added a bathroom and built the kitchen cupboards from scratch.

 

[Geronimo]

They weren't given the houses outright - IIRC, they were either renting or lending the houses to their kids.

 

[LizzieMaine]

Maybe my family is unusual. My 80-year-old mother and former farm girl says she never knew anyone who ever inherited a house. When the parents died, the house was sold and the proceeds divided among the kids, who'd long since moved on. In her words, "we got our houses the hard way."

The generation of farm kids born in the twenties and thirties grew up in or immediately following the most difficult agricultural era of the 20th century -- not just the Dust Bowl, but the collapse of commodity prices across the board as a result of the Depression. Small wonder as many of them as possible got away from the farms as soon as they could.

 

[Mid-fogey]

Even before...

The generation of farm kids born in the twenties and thirties grew up in or immediately following the most difficult agricultural era of the 20th century -- not just the Dust Bowl, but the collapse of commodity prices across the board as a result of the Depression. Small wonder as many of them as possible got away from the farms as soon as they could.

…the Depression, Virginia agriculture was suffering. Improving transportation infrastructure brought Midwestern goods grown on farms with lots of top soil using the latest machinery in competition with Virginia farms that ploughed with mules and had paper thin, worn out top soil.

Interestingly, when my daughter was in the 5th grade she studied Virginia history and the book recounted the transition of Virginia from primarily an agricultural state to one with much more industry. It described how farmers left the land to work in factories. I told her: “that’s what happened to my grandfather. He left the farm to work in the Ford plant in Norfolk and eventually ended up in the shipyards.”

 

[jamespowers]

Interestingly, when my daughter was in the 5th grade she studied Virginia history and the book recounted the transition of Virginia from primarily an agricultural state to one with much more industry. It described how farmers left the land to work in factories. I told her: “that’s what happened to my grandfather. He left the farm to work in the Ford plant in Norfolk and eventually ended up in the shipyards.”

That is exactly what happened to my grandfather. He stopped farming and ranching out here in California to go to work in foundry work, then the shipyards during WWII and back to foundry work later.
They struggled quite a bit but managed to always have a house and raised three children. Housing was fairly cheap out here in 1916 though.

 

[Paisley]

My dad's parents left their homestead in Wyoming to work in the shipyards in Washington. (And my mother's maiden name translates to a shipwright who finishes the wood.)

I know, and know of, ordinary Janes and Joes who bought or built their own houses from the early 1900s to the 1950s. (These were small, basic houses that didn't necessarily have utilities.) I think they had a definite goal in mind and worked to that end. This is in contrast to interviews I've heard with some people recently in default: they figured their rent payment was x dollars, and the payment on a house was x dollars, so what's the diff?

 

[LizzieMaine]

Apropos the discussion of family farms is this article in today's Boston Globe -- a farm in New Hampshire that's been passed down from father to son since 1632. Although it's surrounded by creeping suburbia, there are conservation easements in place that will keep it from being turned into just another grid full of ticky-tack, but whether it can sustain itself as an actual working farm is quite another question.

 

[jamespowers]

My dad's parents left their homestead in Wyoming to work in the shipyards in Washington. (And my mother's maiden name translates to a shipwright who finishes the wood.)

I know, and know of, ordinary Janes and Joes who bought or built their own houses from the early 1900s to the 1950s. (These were small, basic houses that didn't necessarily have utilities.) I think they had a definite goal in mind and worked to that end. This is in contrast to interviews I've heard with some people recently in default: they figured their rent payment was x dollars, and the payment on a house was x dollars, so what's the diff?

WWII and the shipyards changed the landscape quite a bit. There was a population shift from the rural areas and back east to the west and coastal communities. This caused houses to be built out here at speeds unheard of before. The workers came and they needed housing. They put up whole neighborhoods to meet the demand in a very short time with cookie cutter homes that were not huge and not made of the best materials but they made do for the war effort. The population out here quadrupled in a matter of years.
I suppose the subsequent boom resulted in quite shift in housing prices.
The difference between a house and renting is quite a lot. You have to pay to keep up your own house adequately. Renters don't worry about that---for the most part. Then there is that nasty little down payment...

 

[Paisley]

Another difference in the attitude of home ownership is debt, or treating the house like a piggy bank. Those radio ads a few years ago imploring people to "get the cash out of your house!" drove me crazy. You just have to put it back in--with interest. However, I think the consequences of bankruptcy were harder long ago.

 

[jamespowers]

Another difference in the attitude of home ownership is debt, or treating the house like a piggy bank. Those radio ads a few years ago imploring people to "get the cash out of your house!" drove me crazy. You just have to put it back in--with interest. However, I think the consequences of bankruptcy were harder long ago.

Bankruptcy was indeed harder before the Chandler act. You could use it as a busniess but as an individual it was much harder than it is today. In fact, many times today individuals go the state route rather than the federal route as the state's laws(depending on the state of course ) are much more lenient and private.
Today you can get rid of debt and walk away with a lot more than you could before. Some just abandon houses and send the keys to the mortgage company. That happened to my mother's neighbor. They just packed up and left. The mortgage company sold it to a guy for about half what was owed and he flipped it to the new owners for a cool $200,000 more than he paid for it---after doing quite a bit of remodeling of course. I guess it benefitted someone---just not the mortgage company. The guy who flipped it got the cash out of the house.

 

[Paisley]

I imagine he put some cash into the house, too. And maybe some sweat equity.

It's easy to forget in a boom that you take a risk doing that sort of thing. What's the phrase--flips that flop? I remember reading about someone--maybe in Dale Carnegie's How to Stop Worrying and Start Living--who thought real estate was an easy game to make money in, and bought a property using a mortgage. Then came the Crash and Depression--and an experience to be recounted in a book with "worrying" in the title.

 

[jamespowers]

I imagine he put some cash into the house, too. And maybe some sweat equity.

It's easy to forget in a boom that you take a risk doing that sort of thing. What's the phrase--flips that flop? I remember reading about someone--maybe in Dale Carnegie's How to Stop Worrying and Start Living--who thought real estate was an easy game to make money in, and bought a property using a mortgage. Then came the Crash and Depression--and an experience to be recounted in a book with "worrying" in the title.

Oh yes, he did put some money in the property but it had been renovated just a few years ago. He put in some new floors and a new kitchen. That was about it. I would say less than $50,000 for sure.
I wouldn't have done it myself. Housing prices being the way they are, he could well have lost money. I don't do real estate for that reason.

 

[Paisley]

Re: migration, I thought this interactive map was fascinating. It shows who is moving where.

http://www.forbes.com/2010/06/04/migration-moving-wealthy-interactive-counties-map.html?preload=39099

What's interesting about this thread, besides the historical goodies, is that many factors influenced finances: commodity prices, war, government policy, weather patterns, industry; and that some outliers can skew the average (this is why I generally prefer medians). It's worth keeping in mind when someone says that A caused B, where B is a broad phenomenon.

 

[jamespowers]

Re: migration, I thought this interactive map was fascinating. It shows who is moving where.

http://www.forbes.com/2010/06/04/migration-moving-wealthy-interactive-counties-map.html?preload=39099

What's interesting about this thread, besides the historical goodies, is that many factors influenced finances: commodity prices, war, government policy, weather patterns, industry; and that some outliers can skew the average (this is why I generally prefer medians). It's worth keeping in mind when someone says that A caused B, where B is a broad phenomenon.

Ah, people are leaving California---Good!
That brings up some interesting things with commodities. The paradox of why milk--$1 a gallon in 1957 is only $3 a gallon in 2010. Everything else is likely to have gone up over tenfold but milk has only tripled. If milk were like gas from that time, we would be paying $10 a gallon.
Eggs are another interesting commodity. In 1957 they cost about 28 cents a dozen. Now they can still be found for about $1 dozen. That is less than 4 times what it used to be and adjusted for inflation they have been losing money there. If it weren't for mor efficient methods of farming then I bet we would be paying $10 a gallon for milk and $3 a dozen for eggs.
This sort of falls back into housing cost. I often wonder why people are willing to pay four times their annual income for a house that our parents and grandparents (depending on how old your are I guess ) didn't pay more than 50% of their income for one year to buy a house. Our parents also likely lived in the house for the 30 years of the mortgage---thus obtaining a position of equity. Today, they move around and not to an equal position either. They trade up and, disturbingly, never get to a position of equity. In such a position, economic downturns result in the distressed housing market that we see today. People traded in their shovels for backhoes to dig themselves in really good. :eusa_doh:
It seems the old values learned by the generation from the great depression era have died off and taken their values with them. The Baby Boom generation has ushered in the greatest spending spree in American history. With it has come utter incompetence in financial matters at home, within businesses and inside the government. Perhaps a good recession or even a depression would not be all bad for this country. At the very least it would provide a wakeup call to millions of people. People might begin to understand that you can’t keep spending what you do not have without someday suffering the consequences for it. I just hope we get some sense before what we have turns into that depression. :eusa_doh:

 

[Paisley]

"Traded in their shovels for backhoes to dig themselves in dig themselves in really good"--I love it.

Yes, when you keep trading up, you're on a treadmill. But I'm not sure this is such a recent idea. The term "starter," as in "starter home," dates from 1946 according to my dictionary. The term "keeping up with the Joneses" dates to 1913, according to this site.

I think it's possible that people moved more than we imagine, but most of them probably did so to find work or get ahead.

On another note, there's a book that was published in the 20s and 30s that might be of interest: The Richest Man in Babylon. The book was taken from clay tablets excavated from ancient Babylon (in what is now Iraq) that recorded the adventures people had when they got into trouble with money. In that culture, you or a family member could be press-ganged into slavery to settle your debts--and a few people in this book were. Of course, the book gives some "cures for a lean purse." It's available as a free pdf here:

http://www.marcus-baker.com/wp-content/uploads/2010/05/theRichestManInBabylon.pdf

 

[Mid-fogey]

Certainly...


...my grandpa didn't keep up with the Joneses. He literally died in the only house he ever owned -- an 800 sq ft house he did everything to (wiring, plumbing).

 

[Puzzicato]

Ah, people are leaving California---Good!
That brings up some interesting things with commodities. The paradox of why milk--$1 a gallon in 1957 is only $3 a gallon in 2010. Everything else is likely to have gone up over tenfold but milk has only tripled. If milk were like gas from that time, we would be paying $10 a gallon.
Eggs are another interesting commodity. In 1957 they cost about 28 cents a dozen. Now they can still be found for about $1 dozen. That is less than 4 times what it used to be and adjusted for inflation they have been losing money there. If it weren't for mor efficient methods of farming then I bet we would be paying $10 a gallon for milk and $3 a dozen for eggs.

More efficient methods of farming, yes, possibly in some countries subsidies paid to the farmers, but also the farmers getting squeezed by the supermarkets. Some of the supermarket chains are so large that they have a pretty well captive audience; they can run those sorts of commodities as loss leaders to gain/maintain market share and can "negotiate" a deal with the farmers that doesn't leave them with a whole lot of room to move.

 

[kamikat]

I've heard the recommendation to avoid taking on a mortgage that is more than two to two-and-a-half years' income. I think that's a good idea.

Wow! I've never heard that. We would never buy a house in this county if we were to do that. You can't even get condos for less than $300,000 around here.

 

[Paisley]

As I said earlier, there's no way I could afford the house I live in now if I were just starting out. I'd have to get a fixer-upper, wait for a bargain, or move where the house price to income ratio is a lot smaller.

 

[kamikat]

I'd have to get a fixer-upper, wait for a bargain, or move where the house price to income ratio is a lot smaller.

Ah, see, there's the rub. Any city that has the kind of jobs my husband does has overpriced housing. In past years, when my husband has broadened his job search to nationwide, most of the jobs he's qualified for are here, in the DC area, New York City or the San Fransisco Bay area, all overpriced housing areas.