Have you ever wondered what the real estate market was like 100 years ago, before TV, the internet, and most modern comforts? One-hundred years ago the globe was engulfed in disease and warfare, both of which made their impact on the real estate market in America. The world was a much different place a century ago, and so was the housing market. Let’s take a look back at the trends and happenings that affected the real-estate market throughout the early twentieth century.
Between the years 1900 and 1950, more than 15 million immigrants arrived in the United States. Most of these immigrants settled in large cities, requiring city planners to build new apartment complexes, houses, and other residential housing units. Housing costs began to increase, so one solution to rising cost of real estate was to maximize the space which was already used and build upward, extending skyscrapers ever higher into the sky.
A common type of housing for poor immigrants during this time was the dumbbell tenement. The dumbbell tenement had four apartments and two toilets on each floor and was indented in the middle, giving it its distinct dumbbell shape. Developers jumped on this design because it allowed them to make full use of the small city building lots they were provided with. The dumbbell tenement was banned in 1901 due to the air shaft in-between two tenements built next to each other, which allowed for poor ventilation and lighting, and significantly added to overcrowding in large cities.
Using numbers which are inflation-adjusted to today’s dollars, in 1900, a two-bedroom two bathroom home cost an average of $101,600. The same home cost $68,500 in 1942 and $198,000 in 2006. The average price of a home has fluctuated since 1900, with a sharp decline coming in 1916, a sharp rise coming in 1942, and a sharp rise and fall that came in 1996.
In 1901, a home cost approximately $4000.00. According to data from the US census, the average price of a home by 1963 was $19,300. The introduction of mass transit such as trolleys, underground trains, and subway systems led to the creation of the suburbs. As poor ethnicities and immigrants filled up the cities, the middle and upper middle class moved away from the crowds, choosing to live just outside city limits in comfort, and commute to work instead.
In 1916 prices took a rapid decline, in part due to the Spanish Flu Pandemic and World War I. WWI raged on from 1914-1918 and American casualties are estimated at 100,000 dead, and over 200,000 more wounded. The Spanish Flu struck with a vengeance in 1918 and completely ravished the world population, infecting 550 million people, or one-third of the earth’s population. In America about twenty-eight percent of Americans caught the Spanish Flu, and the number that died has been estimated at as much as 675,000. The victims of both of these terrible tragedies were usually young adults. Most new families and homeowners come from this age group. As such, family formation was stifled for years meaning less demand for houses which in turn meant lower housing costs.
Mass production techniques were also starting to appear in the twentieth century, making production on a large scale much more efficient, leading to lower prices. Introduced in 1908, the Ford Model T was one of the first mass produced items. Ford also introduced the assembly line to the world in 1913, further improving efficiency and lowering costs. Not long after these groundbreaking innovations, the housing industry followed suit, introducing similar mass production techniques further lowering housing costs.
The Second World War caused housing prices to spike again, in response to the severe shortages of materials it caused. After the war ended housing prices rapidly increased, due to the large amount of soldiers returning home wanting to start families, extremely lax lending standards and unbelievably low interest rates.
Airshaft of a dumbbell tenement – By Marion Doss on Flickr – Some Rights Reserved
Camp Funston – Wikipedia Public Domain
Ford assembly line, 1913 – Wikipedia Public Domain
Guest Author Bio
Simon Campbell has spent over 15 years in all the various facets having to do with real estate including sales, purchases, investment and research. His experience also includes commercial and residential property management and even real estate appraisal. He is recognized among his peers as an expert in the real estate field. Now after gaining such a wealth of personal experience, Simon has changed directions and is now sharing his knowledge and experience with others through writing, mentoring and consultation. Check out Simon’s profile on Simon Google+ and also his blog.