Young people are just not buying homes nowadays like they used to. junior citizens are well aware of how impossible the mathematics are, but their senior counterparts are not having any of it. We see wringing of hands and gnashing of teeth, often with platitudes and assumptions that are so out of touch that I suspect they’re the literal product of brain damage in these people’s old age, but one of the slicker critiques on Twitter I see is the idea that young people’s expectations are just too inflated because they witnessed the level of success their parents enjoyed, as one Jim Geraghty (of National Review) puts it, for example, “after at least a decade in the workforce”.
Well…there is a kernel of truth to this. But it’s not because young people’s expectations are inflated due to having older parents than was the norm. Take me, for example; my parents were already thirty or so when I was born, and when I was a child in the 1990s my family was able to afford to own our own home — on my father’s income alone — in the suburbs of a metropolitan area. Albeit in a lower-cost-of-living region, but the rub with that is that my father didn’t even buy as much house as he could qualify for; he could have gotten a second home if he wanted to stretch his budget some more. He was mid-ranked enlisted infantry and enjoyed the VA mortgage benefit; but at the time it wasn’t considered exceptionally good pay for a man in his thirties, even locally.
But I digress. Looking at my father’s biography, you know what jumps out at me? He indeed had spent a decade in the workforce; indeed longer! He enlisted in the United States Army at the age of 17, and had already been working jobs for several years prior to that; this was in the early 1980s, when it was ubiquitous for people in their mid-teens to work part-time at retail establishments and the like. He never went to college, so he never incurred any student debt.
And, famously, houses were cheaper then — as a percentage of median income, homes hovered around half of what they do today. Interest rates were punishingly high circa 1980, but by the time my parents bought their first home in the 1990s interest rates were comparable to today’s (6-9% was considered normal). The same rates, but with half the price-to-income ratio…meaning the payment was indeed half as well.
Consider an Average Joe today: he’s going to have to go to college to have a prayer at getting a good job, and that’s expensive. The median college-goer today has student debt measured in the tens of thousands of dollars. For a Baby Boomer entering an average career, that’s not a burden that existed; even if you had to go to college, it was low-cost or even outright free of charge (my mother, for example, went to college, but her parents (who were making upper-middle-class income at best) wrote a check for the entire quarter’s tuition…without even needing to save up beforehand). But more importantly, you usually started working by your late teens at the latest; in many cases even mid teens, as my father did. A professional today often doesn’t start working at all until their mid twenties. A decade later. Which is a lot of money left on the table that could otherwise go into the bank…and serve as a down payment on a home.
So Generation X lived in a world where it was typical to already have been working for a decade by your mid-twenties, with student debt being zero, and with homes costing half of what they do today, both by price-to-income ratio as well as mortgage-payment-to-income ratio.
The equivalent today would be if Generation Z was usually starting work by their mid to late teens, student debt was an exotic curiosity rather than a fact of life for a normal person, and the median home nationwide listed for $200,000 rather than $400,000. In a world like that, then all of the usual advice you hear from old people makes sense.
Yes, if you plan it out and exercise some discipline, you can buy your own home and start a family in it by your mid twenties. Maybe early twenties if you’re a diligent saver and you “pick out the right things” by, for example, moving further out to a cheaper are or by choosing a more modest house. Want to defer life until later so you can have something nicer? Then opt for a modest apartment or get roommates and you could buy something truly premium in your thirties. But don’t get too greedy or spoiled for your own good, young whippersnapper! Fail to save enough money for a down payment on even a more modest property by the end of your twenties? Then you must have splurged and spent too much money, because if you lived more modestly you’d have accumulated enough. Even from an ordinary job paying around the median wage (or lower…).
It all makes sense…in a world like that. As late as the 1990s that was the world Americans actually lived in. It very much is not now.
My favorite example: there’s a hotel I love in Hermosa Beach, California that has suites that are so small but well thought out, that’s literally right on the sand, the sort of place you can turn on the fireplace, open up the balcony, and fall asleep to the surf after you walk out and watch the sunset. It turns out it’s a “condotel”, a rather unusual sort of arrangement where individuals own each suite, can spend up to a quarter of the year living in them, and then the other three-quarters of the year it’s rented out as a hotel room (with the owner receiving the profits). In 2001, when it was first built, the purchase price was within the range of what my father and my grandparents combined could have qualified for. Social Security, military retirements, and home equity would have to have been combined. But the math worked. Now, the exact same sources of money, even though the incomes have been “adjusted for inflation”, would not even come halfway to qualifying for the exact same condo. Ouch.
It’s not totally hopeless. I have a master’s degree and even have experience in the field, so I could become a schoolteacher. In higher-paying districts in the Bay Area they pay enough starting salary to afford to rent a nice apartment in the Sonoma Valley, and still have enough left over to save or splurge. Home ownership? Realistic, especially after a few years of saving up. But notice that a public schoolteacher in the Bay Area’s higher-paying districts is offered double what the vast majority of white-collar professionals make starting out. Yes, literally double. In some pockets pay scales start at $100,000. And the result is…basically the same lifestyle my father got as an enlisted infantryman in rural Kentucky.
Albeit in a much more appealing area, but the point is a living wage is now a luxury product in even the better labor markets our country has to offer: a military officer can make it, with how housing allowances are scaled up exactly in line with what it costs to live, and in a state like California public-sector unions have enough of a death grip on the government to bring home the bacon for their members, but life as the Baby Boomers and even Generation X knew it now costs well beyond what an everyday job a regular person can get is willing to pay them.
What happens once society wises up to that fact? Will the younger generations embrace the oh-so-evil doctrines of “socialism”? Perhaps. But maybe what we should really be frightened of is a world where “the middle class” is just another variation of “poor”, because I have a feeling that’s not a world very many of us would prefer to live in.
I leave you with that thought, as well as the knowledge that another world is possible, and indeed existed within living memory…a world that older generations, in their own minds, are still living in…