SlyFrog
1908
Buy them where? Because here in the Twin Cities, all I see are home sales (and prices) shooting through the roof.
It’s not the Boomers paying $500,000 for a home. If Millennials really can’t afford them, who exactly is doing the buying of these giant homes. Because I can assure you, they are selling.
Nesrie
1909
Well Gen X still exists, despite popular belief, and the front end of the Millennial may actually be experiencing some benefits as well, that’s the older group.
Inventory was low for awhile, so yeah buying is happening but not as much as refinancing was happening a short bit ago. New houses are popping up everywhere… builders can’t keep up in this area.
So it is dropped 6-7% among 25-34 years old. Which is why we are seeing some movement to tiny homes, which while, tiny by comparison to today’s homes, are not that much smaller than 800’ foot place my parents bought in 1947.
I’m honestly not sure which came first, did young people refuse to buy a small house, so that why builders only built larger one. Or did the builder just build big ones, and tore down the small ones.
There are plenty of affordable places in the country, just not in the big cities where young people seem to want to live.
LockerK
1911
Is it all that surprising that young people want to live where the jobs are?
I mean, doesn’t that cart show that home ownership rates are highest among the oldest, including the boomers?
Yeah, but we live in a functional state with multiple large corporate HQs concentrated in a single metro. We’ve been on the incline for years. I wouldn’t be surprised if the Twin Cities buck a bunch of these kinds of economic trends.
Strollen
1914
It is not really true, if you look at the states with the lowest unemployment rates and compared them with states that have the lowest housing prices. There is very little correlation, if any thing there seems to be a negative correlation. Alabama, Iowa, South Carolina Missouri, and Vermont all have low employment and below average to down right cheap houses. While NY and California have above average unemployment rates and sky high prices. Now I get why somebody would rather live in NYC or California rather than Iowa, or Alabama, but its not because you can’t find jobs in those places.
Again, the unemployment rate doesn’t count people who aren’t in the workforce. And the correlation you’re looking for is with wages and housing prices.
LockerK
1916
Perhaps I should have phrased it as “careers or jobs that pay a reasonable living wage”. Yes, you may be able to find a job but finding a job that can afford a house is a bigger ask. Using your numbers, and being generous that someone on the lower end of the income scale can save up a 10% down payment you’re looking at ~$1200/mo in Arkansas.
For someone that makes $20/hr in Arkansas that’s half their take home pay without considering any other debts or living expenses, and $0 put towards retirement. Let’s say our mythical millennial Arkansan does find that $20/hr job, manages to save up $20k, and lives a very spartan lifestyle to buy that house. There is now a very large, very real pressure for them to keep that job at all costs because the odds of another decent paying job coming around in a low population area are slim.
But, good news on the horizon!
Once the boomers start dying off, supply will increase and housing prices may cool.
All kinds of crazy things are likely to start happening when the boomers really start dying off in large numbers. I do wonder if many 30-somethings are going to want those stupid McMansions, even if they get cheaper.
I heard a story on public radio maybe yesterday about new-start housing sq footage starting to come back down, but I can’t seem to find a transcript of it. They attributed the change at least in part to lumber prices finally coming back down, so that builders could again make a profit from building a smaller, more starter-friendly house.
Enidigm
1918
There are only 73 properties listed in Austin under $150,000. Many of these are lots, most are under 1,000 sq ft, most are between 500-800 sq ft.
I’m starting to come around to getting rid of the mortgage deduction.
Of course much of this comes down to a lack of central planned cities - what the US needs now is something like Asian or European city planning, building vertically with public transportation infrastructure. But doing that effectively requires all the existing cities to be torn down and rebuilt again, and obviously that’s not going to happen.
On some level every city is going to experience gentrification if it’s growing in the US because of the way US cities are designed and zoned. This comes at the same time as rural cities more or less dying completely as they only need a bare fraction of their former populations for agriculture, so you hardly have the option of moving far away to live. These factors really push urban sprawl and massive transportation problems as the only way to live is in a city, and the only way to afford living in a city is to move out, not up.
SlyFrog
1919
I’m not talking about home ownership rates. I’m talking about who is buying homes. Who is currently paying $500,000+ for the McMansions. It’s not the Boomers. They may own them from years ago, but they are not driving the frothy housing market. They have their homes. And they’re not moving into McMansions to downsize in retirement.
Many of them are being bought by those among the other generations with the means to buy them. No one is saying that there are e.g. no affluent millennials. And some are probably being bought by boomers. I’m not quite a boomer but I’m boomer-adjacent (born in 61) and I own a house in that price range that I bought in the last decade.
I have no idea where you come up with your numbers. By definition median means half of the houses are below, a person buying a starter home better be buying below the median. My partner and I have bought 5 places between $40k-100K near Independence MO, with homeownership cost in the 400-600/month, we rent them for more.
According to the article, Arkansas is even cheaper than Missouri Here is what you can get for $100K in Little Rock.
There is plenty of newer or smaller places, like townhouses or condos available for $50-$80K also.
Zillow puts the cost of ownership at $503 month. Even if, you only put down $10K another $2k for closing cost and have mediocre credit and end up with 5% not 4% loan mortgage, plus insurance and taxes around $600/month, at $20/hour that 20% of your salary for living expenses and doable even at $15/hour.
It is been a long time since I’ve been to Little Rock but Bill and Hillary survived there for many years. So no it’s not SF, or NYC, or even Austin but if you value home ownership over other things.
Enidigm
1922
The problem is that the reason homes like that are cheap there is because there’s nothing to do there. I don’t mean “for fun” but for work.
https://www.linkedin.com/jobs/search/?currentJobId=1574015704&keywords=jobs&location=Little%20Rock%2C%20Arkansas
So here’s a project manager, looks appealing, right? Hey management
Oh
Which is effectively just a dollar or two more than what McDonalds is offering in my town. Bus drivers are making $5 an hour more. Without overtime at $14 an hour is a yearly income of $27,300.
That’s why homes there are $100,000.
LockerK
1923
I used the numbers from the article you linked and then backed out PITI and take home pay using calculators from NerdWallet and some payroll calculator site (I don’t remember and no longer have the window handy) to come up with those numbers. That said,
You are part of the problem
and are trying to argue that the market from before most people trying to buy their first home were born is relevant. So I will bow out because I don’t think there’s a productive conversation to be had.
CraigM
1924
Arkansas has one of the lowest labor force participation rates in the country too, ahead of only West Virginia and Mississippi.
Like we all know there is a correlation between city size and number of jobs. That even though small towns may have cheap housing, there is little to no local industry often. Or if there is, there is basically one employer. For example to pick a rural town of moderate (>1000) size near where I lived, Mendota, IL. Houses are certainly cheaper. But there isn’t really much there. If you don’t work at the Del Monte plant, it is mostly retail and restaurants aside from some rail work. So if you are a fresh faced 20 something looking for work, is this really an option?
A small community where there isn’t a lot of outsiders where you have no previous connections? With one major employer that if you don’t fit with then what?
I mean does it make sense to upend your life to move to a place with cheap housing if there isn’t much job opportunity there? What if you need to switch jobs?
Saying housing in location X is cheap is deflection at best. And it isn’t all just because young people want certain activities and life options. Though there is some of that. Are you single? Well it is a rather shallow dating pool. Are you single and not (insert local dominant religious denomination) well you are really hosed.
It is a confluence of many factors. You could not pay me enough to move to Kansas. That is entirely cultural. I moved to Portland, that was entirely economic and opportunity. Both played a role. But did I even consider Little Rock? No, because aside from certain cultural elements, which are not a deal breaker like Kansas, it did not have much opportunity for me. I don’t care how cheap the housing was.
Yes, exactly. The correlation is going to be between housing prices and income, not housing prices and unemployment rate.
Median household income in Arkansas (#48) is $46K, the payments on median home price $179K, with 20% down is $685 add another $200/month for property tax and insurance and your living expenses are under 25% of your salary. So two people making $12/hour can actually afford a place.
Another important thing to consider is interest rates. My first mortgage was 13.75%, my current is 3%. Back in 1990, the National Realtor started publishing the Housing affordability index, which compared the median income level to the monthly payments for the median house in various markets and also nationwide. It started off at 100 and peaked at 200 shortly after the great recession, caused housing prices and interest rates to both fell. It is now back to around 150 before being discontinued recently. I’m simplifying somewhat, but basically what 150 means is that the median income household can afford a mortgage payment on a house that is 50% higher than the current median house price. So it is a lot easier to buy a house now than it was back @CraigM dad bought one.
My partner (mid-30s) in Missouri was supporting a wife and two kids on his UPS driver’s salary of around $23/hour before he switched careers to become a house flipper. Would have preferred to stay in Hawaii after he left the army, you bet. But he chose to live someplace where he could afford a house to raise his family.
I’d also point out this is 2019, lots of jobs can be done remotely. I know a fair amount of folks who either work for tech firms or contractors that live here in Hawaii, the most expensive place. Can they buy a home here? It is a struggle even with a spouse also making $100K+. They could do there job anywhere in the US, including Arkansas. (I’m thinking of the show Ozarks). But they made a conscious decision to prioritize enjoying life today over homeownership saving money etc. Now for all I know Little Rock and Kansas City are filled with remote workers, saving money.
YOLO, so I completely understand your tradeoffs. It is likely than Gen X and Millenials are making far more intelligent choices, than us boomers made, with buying houses and things, versus experiences.
That said we have seen a significant decrease in mobility in the US this last decade people are much less willing to take a risk and move to someplace new looking for jobs. That applies both the coal miners in KY and West Virginia not being willing to move to Idaho for coal mining jobs, as well as recent college grads not being willing to move to Kansas or Arkansas find more affordable housing.
Consequently, we see housing prices skyrocket in desirable places and stay pretty flat in much of the rest of the country.
