How do they afford those things?

By Joe Rector

Money—it’s something that most of us are short on. It is the means by which we can gain things that we need and want. What amazes me is how prices of things have gone up so much over the years. I often wonder how folks manage to pay for the items they buy.

During my sophomore year in college, the old ’54 Chevy gave up the ghost and died in the dorm parking lot. My older brother talked to my mother to convince her to borrow money to buy me a car. I selected a Volkswagen Beetle. It was brand-spanking new. The cost for that vehicle was $2600. Excited to own a new car but embarrassed that I had to ask my mother to purchase it, I drove that Bug off the lot.

Today, the cheapest model of the VW Beetle averages $19,995. That equates to an increase in price of almost 8 times what the car cost back then. Yeah, I get that these are different times and that cars are much nicer than they were; however, the fact remains that a Beetle is still a Beetle. I watch men who are mad with desire for trucks plunk down $40-50,000 to own them. They finance the things for 7 years, which is much longer than the life of most heavily used vehicles.

Amy and I bought a house after we’d been married a couple of years. It was one built by the vocational building trades class at Doyle High School. We bid $32,000 for a house that had a living room, kitchen and eating area, three bedrooms, two bathrooms, and a half-basement.

A couple of years later, we built a house in Ball Camp. It had two bedrooms, two bathrooms, a large living room and kitchen, eating area, garage, deck, and screened porch on a one-acre lot. We finagled our finances to afford this $36,000 house. The $241.00 a month payment came with 9% interest. It also included escrow for mortgage insurance and taxes. We tightened our belts and did without some things to be able to afford this house. In fact, we still live there, although the place has undergone two additions and renovations over the years.

At the present time, the median listing price for a house in Knoxville is $185,000, and the price per square foot for construction is $114. That means for a 2400-square foot house, the size of my residence, a person would pay $266,400. For a 30-year loan with a 3.92% fixed rate, the payment for the house would be $777.31.  That doesn’t include taxes and mortgage insurance.  The payments alone equal $9400 a year, only $600 more than I made each year when we built our home.

Surprisingly, the cost for renting an apartment isn’t much better these days. Amy and I rented a three-bedroom house for $125 a month before building our house. The average rent in Knoxville in 2015 was $723. How in the world do families find enough money to pay for a place to live?  Things worsen when the cost of utilities is included. A 915-square foot apartment has an average monthly utility payment of $145. So, just to secure housing costs an individual $11,000 a year.

I could go on about other skyrocketing prices for such things as food and gas, but the costs for vehicles and housing produce enough sticker shock for me. I suppose folks must be raking in huge hunks of money these days. If not, they are treading water fast just to keep their heads above the currents of debt. I don’t see how a young family makes it, and I worry that prices in the future will only go higher. Sure the wealthy won’t have problems with cash but we who are middle class are that lucky.

So, my question, once again, is how do folks afford those things?

 

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