Americans face big cost-of-living rises

Press, 21 July 1982, Page 5

Americans face big cost-of-living rises

NZPA staff correspondent Washington

Latest figures give an interesting picture of costs facing the average American family, and may give some solace to New Zealanders who feel their own mortgages and other housing costs are sky-high. The western states, ranging from Alaska' down to Hawaii, and across to Colorado. are the richest in America.

The average household income for buyers of houses or apartments in those states last year was 5NZ64.806. far above the national average of 5NZ52.914.

The average house or apartment price in the West, on the other hand, was JNZ128.229.

Even so. 70 per cent of buyers put down at least 20 per cent of the purchase price, and more than a third of the buyer n the western states were : ’le people. That depo. .u left them paying an average of SNZI364 a month for mortgages. rates, house insurance and gas, water and electricity.

Well over half of them broke the old rule of thumb, applied in New Zealand too. that no more than a quarter of household income should go on such housing costs.

, The shocker is the way costs have risen since 1979. although inflation here is running at only 6.5 per cent, compared with 17 per cent in New Zealand.

That monthly outgoing last year of more than SNZI3SO is half as much again as it was two years before. The average price for a

house or ‘’condo" (own-your-own apartment) in the West is 5NZ29.700 more than the 1979 figure. That represents a rise of 30 per cent in two vears.

Salaries are not increasing at anywhere near the same rate. Nationwide, white collar salaries rose by between 9 and 10 per cent for the year ending last March 31. Blue collar wages increased by only 5 per cent. The median income of home-buyers in the West actually increased 50 per cent in the two vears. from 5NZ43.343 in 1979. but that would appear to reflect a change in the type of people buying rather than any indication of general salary increases.

Mortgage interest rates are much farther above the inflation rate than they are in New Zealand, and the result is that many would-be home-owners are renting instead. This is even though the stagnant market is forcing house prices down, or at least keeping them from rising. with new twists on financing on offer from all sides.

One of the most popular is "balloon" financing, where the payments are low for the first five years or so, then bulge with the expectation of a solid increase in the homeowner's income.

The current recession is resulting, however, in a high level of mortgage sales. The pace of change in America is also reflected by two other statistics:

• In 1979. 25 per cent of home-buyers in the West were single. Two years later

that figure was more than 33 per cent. • Only 16 per cent of homes bought in the western states in 1979 were "condos." By 1981. that figure had risen to almost 33 per cent.

In other states, house costs and monthly payments were lower than in the West, but so too were salaries.

The average down-pay-ment across the nation last year was $NZ21.600. on a median price of 5NZ97.200. with condominum purchases rising to 21.5 per cent, compared with 11 per cent in 1979.

The condos. generally cheaper, have become more attractive as household budgets shrink under the recession. despite many Americans' dream to own their own house and "yard."

The home prices and outgoings need to be related tc income and other expenditure. and the rising number of purchasers who are single may merely reflect the growing habit of couples living together without being married. This would mean the average of true household incomes may be higher than the. official statistics show.

Taxes in America, once federal, state, social security and sometimes even city and county levies are all taken into account, can be reckoned as roughly similar to those in New Zealand.

Big items, such as cars, stereos, furniture and whiteware. are a lot cheaper, but. with the major exception of petrol, day to day living is more expensive; a draught beer in Georgetown, the “latin quarter" of Washing-

ton. will set you back 5NZ3.37 for example.

At the end of March, the average pay clerk earned SNZIOIS a month. Secretaries. who are scarce in many areas, ranged from SNZIS7S to $NZ2424. Corporate lawyers earned a handsome SNZ2B3O as juniors, with their seniors drawing SNZ6SO9 a month.

Computer programmers, the rising elite, earned SNZI972 to start with and SNZ39BS at the top of the scale. Computer operators' pay ranged from SNZI337 a month to SNZI777.

Top engineers earned even more than lawyers. Pay for graduates at the start' was SNZI72 lower at ?NZ2658 a month, but at the pinnacle they outpaced lawyers to earn SNZ7O3O as directors of complex programmes.

President Reagan is obliged by law to consider the labour department survey from which these private sector salary figures were drawn when he recommends pay increases for Federal employees, but the current budget limits rises for Federal workers this year to 4 per cent.