> We went from multigenerational homes and kids living with their parents, inheriting their houses, and if buying -- doing it after they grew up and saved / got help to buy their own house. To a situation where everybody thinks the first thing you have to do after you get your first job is to get expensive mortgage and buy your own house
the situation is pretty much the opposite of this, we went from where folks could afford a house pretty quickly, sometimes even on a single salary, to double incomes not being enough, and the only hope of housing for some now being multigenerational and/or inherited
>But, as you mention, homes are priced insanely high
Homes in some areas are higher. Others they have increased with inflation and are more affordable due to lower interest rates.
The "life is so hard these days" crowd is living in a bubble. They live in a coastal city and have debt from their expensive school that they may be struggling to pay back. [Not coincidentally this describes lots of the media].
Reality is that the majority of people don't go to college. And the majority of those that do graduate with reasonable debt into jobs that pay well enough to pay it off. Simply put, it's easier to live today than virtually any other time in American history.
I think people are overthinking the problem when it is quite simple: Housing prices have put owning your own home out of reach for the vast majority of young people.
I worked hard to pay my mortgage, feeling happy that I was on my way to owning a house. With a house, I started a family and life was good. I didn't mind putting up with corporate nonsense.
Without a house, I most certainly would not done this. I probably would have kicked around doing odd jobs to save for going backpacking in Thailand. Why the hell would I want to be part of a system that doesn't reward me? There's no reason to buy in (or sell out)
>>There is another side of this that the article doesn't touch on: home ownership.
Oh boy. There's so much I can say about this topic, and none of it is positive.
Basically, the way our culture mindlessly promotes home ownership is insane. Absolutely insane!
Every time I hear people complaining about "throwing away money" by renting, and how they would rather put that money into a house, I want to hold them by the shoulders and shake them violently. It's like the housing market crash did not teach anyone anything!
It comes down to this: a house is a terrible, terrible means of investment. It's a fixed asset that, contrary to popular belief, is not guaranteed to always go up in value. In addition, people don't really take into account the negatives. Primarily, a house ties you down. You have zero mobility as a labor market participant if you own a house, and this significantly reduces your leveraging power when it comes to negotiating salary. Besides that though, houses have a ton of expenses, and as fixed assets they are subject to a lot of uncontrollable risk (fire, floods, earthquakes, the neighborhood depreciating, etc.).
Instead of having that money tied down on a house, people are much better investing in the stock market, which has, over the past 100 years, gone up by 7% annually.
The only time a house makes sense is when raising kids. The stability of the environment has a lot of positive benefits for their growth. It also makes social integration easier.
God it's depressing. I'm jealous of the generation who bought homes for the equivalent of one year's salary, sat on them while their value multiplied 20x, and then had the economy shut down for two years for their safety. And of course, they received healthy pension increases while the minimum wage remains stagnant.
> People have "checked out from the system" because the system has abandoned them. When homes are $1M or more, there is no point working a second or harder job in order to afford a home, for many people owning a home is now forever out of reach.
In the past decade I've seen a ton of young labourers who just do seasonal work and then spend the rest of the year backpacking or living in a cheap country Asia. These are talented and very hard workers, but they have little chance to make a life for themselves in the country they grew up in.
They will loose money if they stay and work the whole year, because of the cost of living, and the progressive taxes, not to mention that all-year employment is usually the 9-5 with no overtime. Better to make a quick buck working hard in the season and then go travel and have a much higher quality of life for much less expenses. You'd be dumb not to do it.
The people who have a chance of owning a home are either those whose parents help them financially or those who manage to get a government or corporate full time job that the bankman likes. The rest are completely screwed, and have been for decades.
Prices rise to what the market will bear. Cheap debt means the market will "bear" more than it would in a less leveraged society.
If everyone but me takes a loan, the price of tuition goes up. This means I now have to take a loan or not go to school (which means I can't get a job).
Same happens with housing. If everyone but me takes out a jumbo mortgage, prices go up and I now must take out a jumbo mortgage or forego homeownership.
As long as a degree is a required piece of paper to obtain most jobs, college will be a requirement. As long as rent offers no equity and mortgage interest (but not rent) is deductible, homeownership will remain one of the middle class's sole paths to the accumulation of wealth.
Today's wacky "in-deflationary" economic condition can continue as long as central banks hold interest rates near zero and wages are stagnant.
Someone in the past few months was describing this situation as a return to feudal concepts, where the only most practical way to buy a house is to live with your parents until they die and then inherit it.
"Housing as a vehicle for building wealth and housing becoming unaffordable for the younger generation are two sides of the same coin."
That's a great insight.
This doesn't seem to fit the facts. Entire occupational classes today can't buy homes that a single income household could buy in the past. The quality of housing is better in some ways (much bigger, heating, AC in most areas, etc.) but that's not much consolation if you're priced out.
Probably not a sympathetic audience here, but if you look back more than the relatively short timeframe of 20 years things are far more cyclical. I grew up with double-digit interest rates, so while everything was cheaper, financing was far more costly. The generation that's now looking to buy a house grew up with a financed lifestyle (via their parents) that was essentially interest free and not sustainable in the long term. I see a lot of people who believe their first home should look a lot like their family home: new, desirable location and affordable. This has never been realistic.
"Think of a woman who buys a home in one part of town, takes a new job in another area a few years later, and is then stuck with a 90-minute commute, or of a man who turns down the better job because he doesn’t want to sell his home or be saddled with a long commute. Now multiply that by millions of households across the country. Homeownership locks people in place, in large part because of the high transaction costs of buying and selling property."
This assumes that you exist first and foremost to work jobs, and anything that impedes this is bad and needs to be optimized away. This is very American, very contemporary - don't accept it as universal.
Move a little to the side in time and in space and people are "from somewhere", live there, and optimize their life to improve them living there - possibly by taking jobs in the vicinity.
I think this is an excellent comment. What makes me very sad is that during the past 14 months the divide between those who own assets and those who don't has reached gargantuan proportions.
I mean, in my raging inferno of a housing market, over the past couple of years home prices have easily doubled. So a 400k house from 2018 now sells for 800k. Yes, if I want to move to another house in my area I'll pay similarly astronomical prices, but that just means it's about a wash for me, and of course I have many more options like moving to a cheaper locale or a cash out refi.
But if I (or my parents) don't already own a home, it means my chances of ever owning a home in my area just went to about zero. People made vastly more money just sitting around in their houses in the past couple years than I made in my job as an "essential" worker over the past decade.
That he can't afford the house he grew up in has to do mainly with two factors:
1. House prices are still ridiculously high, since cities and college towns haven't hit the back side of the bubble yet.
2. The academia job market has shit all over its knees.
The economic tone of the past 35 years isn't growth or decline but stagnation. Some people are better off than their parents; some are worse off. This has always been the case, but it used to be that being better off was far more common. Now it's 50/50.
Economic growth has been decent in the past 35 years, and world economic growth has is at record highs, but the upper class (which is better described as a malevolent and extremely powerful interest group than any kind of formal conspiracy; of the latter, there is none) has done an excellent job of siphoning off all of the gains for themselves, leaving the lower 99.5% of the American population in essential stagnation. They don't want the American lower- and middle-classes to get poorer (they'll revolt) or richer (they'll challenge their position) but to stay right where they are.
>Missing from this story is a third, even more fortunate group: the rapidly growing number of Americans who own their homes outright.
Missing from this story is a fourth, the even less fortunate group: the rapidly growing number of Americans who have never owned a home and know better than to try. The growth of this group is likely what's causing the growth in the relative proportion of home owners who are mortgage free.
> “When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he said. “We’re at a point now where the expectations of younger people are very, very high. They want to eat out every day; they want travel to Europe every year.
The modest house where I grew up in the D.C. suburbs (1,150 square feet, three bedrooms, built in 1950s, okay school district) is estimated on Redfin around $600,000.[1] That's a $120,000 down payment. According to the article, millennials spend $3,100 a year eating out. Even if they cut that out entirely, it'd take them decades to save up that down payment.
The cost of housing and rent has gotten so out of control in major metro areas that the usual frugality tips don't make much of a dent. What good does cutting out your $4 latte out do (maybe $100 per month), when your rent is $2,500 month for a 1BR?
[1] My parents bought it in 1990 for $175,000. People in my dad's line of work certainly don't earn 3.5x more than what they used to back then.
the situation is pretty much the opposite of this, we went from where folks could afford a house pretty quickly, sometimes even on a single salary, to double incomes not being enough, and the only hope of housing for some now being multigenerational and/or inherited
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