Anyone who’s tried buying a home within the past few years may have noticed that, for the most part, they’re downright unaffordable. The reality is that the lack of affordable housing is an issue stemming back to the subprime mortgage crisis a decade ago. Today, millions of millennials can only dream of homeownership because buying a home is simply not a possibility for them in today’s economy.
How It Happened
We have a straightforward supply and demand problem. The demand for housing exceeds the number of houses that actually exist, creating leverage for realtors to stick any price they want on a nice home. Since the Great Recession, we haven’t been building enough homes to keep up with population growth. This is because for many years construction was stalled because builders didn’t have access to the loans they needed to build new housing, which brought construction to a halt. Today, they’ve resumed building, but they’re producing more lucrative luxury homes instead of regular ones, which means a lack of affordable housing options for the average Joe.
Additionally, the economy has since recovered, and prices have surged as well. Places with the most robust job markets often give rise to the hottest housing markets. It’s not a coincidence that San Francisco, New York, Washington D.C. and similar cities also happen to be some of the most expensive places to live in the whole country. If you live in one of these metro areas, you are also actively competing with the ultra-wealthy people who can afford these ridiculous prices.
One of the reasons millennials are not buying property, cars or even starting families at the same ages as their parents did is because of their record levels of student debt. This should come as no surprise, as college tuition payments have risen dramatically over the years, and student debt is crushing even the most ambitious millennials’ dreams of homeownership.
Additionally, prices for even the most modest homes have risen at an alarming rate while wages have stagnated. At the same time, education and healthcare have become wildly expensive. On the housing front, these issues are complicated by outdated zoning laws and builders afraid of another real estate bust.
A Dream Out of Reach
The price of some houses in hot metro areas is outright depressing. For instance, there is a home in San Francisco that is retailing for $800,000. Seems reasonable enough, right? Of course, there’s a catch: the house only has one bedroom and bathroom, and it actually burned down in 2016. In fact, the fire damage was so significant that the rest of the home will have to be gutted. That’s right folks; even a house burned to a crisp is listed for more than most millennials will earn in 20 years.
This is the same San Francisco with a decomposing wooden shack built in 1906 listed at a whopping $350,000. At the time, that also happened to be the cheapest home in the city. While San Francisco leads the pack as a notoriously tough market, the housing crisis is undoubtedly a growing problem in many major cities across the country. As the country’s population continues to grow, housing is bound to become even less affordable.
Though a quarter of your income should ideally go to housing payments, that number increases to 33 percent after accounting for the cost of utilities. Nobody should have to spend the majority of their take-home pay on housing, but that’s exactly what’s happening in many cities across America. Owning your own home was once the most visible part of attaining the American Dream, but today that dream is growing increasingly out of reach for most millennials.
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