Home ownership used to be a proud moment, a key cornerstone of the American Dream.
That appears to be changing.
In 2023, 93% of American homebuyers have had regrets about purchasing a home, up 20% from 2022. The reasons aren’t surprising. The median home price was $426,056 in June, very close to the record high of May 2022, reflecting a lack of supply. According to Gallup, 21% of Americans believe that now is a good time to buy a home, a record low in the survey’s 45 year history.
Let’s try a little equation.
$421,056 (median home price) / $70,784 (median household income) = 5.94.
Let’s break the costs down by state. West Virginia has the best ratio, with the median home price 2.39x of the median household income. Iowa is just behind at 2.61x and Oklahoma at 2.72.
The population of these three states is roughly 9 million, which is 2.7% of the contiguous United States.
Alabama, Arkansas, Indiana, Kansas, Kentucky, Louisiana, Mississippi and Missouri have ratios at around 3x. The population of all these states is 36 million, or 11% of the contiguous United States.
In total, 14% of the U.S. population lives in a state which has median home price to median household income ratio of 3x or below.
The reality is that for many people, a home will cost more, even far more, than 2x to 2.5x their annual income.
Consequently, 33% of Americans between the ages of 18 and 34 live with their parents as of 2021. This includes millennials, my generation. Although over half of millennials are now homeowners, we do so at a slower rate than previous generations.
Unlike the agreement surrounding the state of the housing market, Americans are divided about adult children living with their parents. White adults, men, upper income earners and Republicans are more likely to view the trend as bad for society, while African-American adults, Hispanic adults, Asian-American adults, women, middle/lower income earners and Democrats are more likely to view the trend as good for society.
I contend that most Americans, especially the oft maligned millennials, would love to purchase their own home. After living under a parent’s or parents’ roof for 18+ years, the independence is appealing, even if the relationship was healthy.
The fact that fewer millennials own homes makes sense paired alongside the way they have approached family life. They are less likely to have children and more likely to wait if they do. Fewer get married, also postponing that life development if they chose it, and are fine with living a romantic partner prior to marriage. Millennials are more likely to have a partner of a different racial or ethnic background, too.
On the surface, it’s easy to label these trends as depressing, in particular if compared to those of previous generations. Nevertheless, I think there’s another way to look at them.
While home prices are rising much faster than wages, so is their size. In 1949, the median home size was 909 square feet. In 2021, it had more than doubled to 2,480.
Bizarrely, homes are becoming larger as American families become smaller. In 1960, the average household size was 3.33. In 2021, it was 2.51.
Perhaps skyrocketing home costs are a blessing disguise. As American families become smaller, with fewer having children, why should our homes become larger?
I might sound like a modern Cato the Elder. I’m alright with that comparison.
We millennials have come of age in an era of environmental problems and a tough job market. Therefore, it follows that we are pioneers of the ‘tiny home’ movement. These eco friendly structures are 400 square feet and cost $46,300 (without a foundation) or $119,900 (with a foundation) on average.
No doubt the job market, inequality and the like need to be resolved. Yet in many ways, we can control our destinies by modifying our appetites and returning to simpler life.
Such as the insane housing market.