Inflation and Real Estate- Or What Psycho Can Teach You about Inflation

What ‘Psycho’ can teach you about inflation

The price of cheap motel rooms, new bathrooms and Madison Avenue salaries in old movies are a lot more accurate than you’d think.
Via 360Digest

By Les Christie, CNNMoney.com staff writer

February 22, 2006: 2:19 PM EST

NEW YORK (CNNMoney.com) - $25 a day plus expenses. That’s what Sam Spade (Humphrey Bogart) charged to do detective work in 1941’s “The Maltese Falcon.”

Sometimes, money references in classic movies provide the jolt that reminds us of how inflation has changed what we pay for things. After adjusting for inflation, $25 in 1941 is the equivalent of $332 today — a PI today might get between $80 and $125 an hour (or more).

Sam Spade's $25 a day plus expenses is equivalent to about $330 today.
Sam Spade’s $25 a day plus expenses is equivalent to about $330 today.





Mike Myers skillfully exploited the disconnect in the first “Austin Powers” epic. The villain, Dr. Evil, who has just come out of a 30-year deep freeze, is holding the world hostage and demands . . . (portentous music) . . . $1 million dollars to spare it. After some consultation with henchmen, he ups the demand to $100 billion.

Even in 1997 dollars, when the movie was made, a million 1967 dollars only comes to a little under $5 million. Either Dr. Evil was a bit of a piker or the cryogenics had frosted some of his brain cells.

Here is a sampling of some classic movie money moments, complete with a rating of how surprisingly HIGH or LOW they seem from our perspective in 2006

Of Mice and Men: Cheap land?

Some movie prices seem totally divorced from reality. Lenny and George in “Of Mice and Men” are trying to scrape together $600 to buy a rabbit farm in the Salinas Valley. In California today, $600 wouldn’t buy a rabbit hutch.

Rating: LOW. The movie may be set during the Great Depression, but even adjusting for inflation, $600 then is only about $8,500 today. Perhaps Lenny and George were angling for a no-down payment, interest-only mortgage, intending to flip the property in six months.

Psycho: Cheap digs?

In the 1960 Hitchcock opus, “Psycho,” the room rate at the Bates motel is $10 (including a hot shower), which sounds pretty low, but it’s actually the equivalent of $66 today.

Rating: HIGH. Remember, this isn’t the Ritz; it’s a seedy place in the middle of nowhere that the new highway has bypassed, leaving it with no customers. For $66 you can rent a pretty good room in a chain motel and not have to worry about Norman’s mom.

Mr. Blandings builds his nest egg

Few movies spell out prices as completely as “Mr. Blandings Builds his Dream House,” the timeless tale of home buyer and home owner angst from 1948 starring Cary Grant and Myrna Loy. Of course the prices aren’t quite as timeless.

City dwellers Grant and Loy buy a rural Connecticut home on about 35 acres that is in such bad shape, demolition is the only solution. Purchase, demolition and construction ends up costing a total of $38,000 for a home with four beds and three bathrooms — the bathrooms costing $1,300 a piece. That translates into $308,100 total cost in 2006 dollars, with each bathroom going for $10,540.

Rating: Low. Even with all their overspending, the Blandings came out very nicely on their investment. The median price of a four-bed, three-bath home in that part of Connecticut would just over $600,000 today, and that’s with a small lot, not a sprawling 35 acres. The price of the bathroom is spot-on. A bathroom remodeling costs an average of $10,499 today.

Of course, despite Mr. Blandings’ worries during the movie about being stretched financially, he should have been able to handle his spending spree. He was earning $15,000 as a Madison Avenue copywriter. That comes to $121,618 today, (doing far better than Ted Kramer 31 years later). He should have been able to easily handle the $18,000 mortgage identified in the movie, which would have had payments of just over $100 a month, especially if he was able to scrape together the other $20,000 on his own. Top of page