We see that the median income has dropped by $4,000 over the past decade while the price of a new house has jumped up by approximately $70,000.
As a recent grad with a decent job, there is still no way in hell I'm going to be able to afford a mortgage on any decent, middle-class house in a semi-urban area for a very, very long time, unless I want to move to Detroit or a similarly bankrupt/developing part of the US. I'm also speaking from a debt-free perspective: if I had come out of school with $100k+ in student loans, forget about it.
The only kind of jobs that are going to pay for good houses in the future are banking/tech/fortune 500, which have median salaries of ~60k right out of school and a well-compensated track to climb. These jobs are becoming increasingly scarce and hard to obtain, especially with competition from out of country talent.
I wouldn't be surprised at all to see my generation (I'm 22) having an extremely low & delayed demand for purchasing housing, and to eventually see what is happening in Detroit (houses abandoned, rotting away [2]) happen on a smaller scale across the country where there is too much housing supply for too little demand.
And no, prices will not equalize to accommodate lower salaries because real estate always appreciates in the long run...right? The Chinese, Canadians, Mexicans, Indians, and British seem to think so: foreign investments in US real estate totaled $108bn over the past year, or 8% of total existing home-sales dollar volume. Unsurprisingly, they are "spending more money on fewer homes," aka they are driving real estate bubbles in major cities such as NYC and SF. [3]
So we'll see a bunch of late 20, early 30 something's living together, splitting the rent in what would have once been a 4-6 person family house in order to make ends meet/be close to work. Maybe they'll even drive for Uber on the weekends. Welcome to the sharing economy.
[1] Note that I placed the data on separate axes so the scale might not be what you expected.
Actually if we ever get remote working working then it would allow people to live anywhere (including cheap places) and still have jobs - as more of our lives move online geography will matter less and less.
In regards your more general complaint even us x-ers are not is such a good position in regards real estate. I have a very good job, two incomes, yet I live in an apartment (admittedly a very nice one). I would love to own a house, but the prices are far out of my reach in my area.
Unless we somehow lose the need to socialize, I can't see myself agreeing with your first point. People are excited to move to SF/NY so they can be around young, bright, like-minded peers.
People move out to the burbs once they find a mate, settle down, and have kids. Then they don't need to get liquored up with their buddies on the weekend and look for drunken revelry and romance.
Moving out to the boonies in your early 20's would probably stunt your social development, even if you could get paid decent money to maintain a couple of servers in SF out of Ironton, Ohio.
Also, 2 incomes - how do you manage that? One active and one passive I'm assuming.
As more of our socialising moves online the need for physical socialising will decline. Anyway there are plenty of cheap places in the world with a great social life, but without local jobs. Remote working would allow you to have your cake and eat it.
In regards the two incomes I was referring to my wife’s income and mine :)
I remain unsold on the feasibility of remote working at scale. I also sense a backlash against "fake" ways to scratch the social itch, such as accruing likes on a facebook photo or watching countless Snapchat stories. A lot of my friends are getting fed up and ditching the services. They still go out and socialize physically just as much as before.
Ah, so you have two sets of costs then as well, and possibly a third on the horizon. Best of luck to you in securing a nice house in a nice neighborhood. Maybe wait until the current real estate bubble pops. Then you can rent it out to random people and have them work there with you :)
It is hard to know if remote working can be made to work at scale - my feeling is it could once we reach a certain bandwidth, but we are few years out for this.
Online socialising is really important. I lived in a small city in Australia for 7 years and the only way I could mentally survive it was via access to the internet - 10 years earlier and there is no way I could have lived there. I do share you lack of interest in social media though.
I have more than two sets of costs - I have three boys! I have been waiting for real estate to crash for years and every time I think it can’t get any higher something comes along to kick it even higher. I know at some point it will stop rising, but when it does it won’t be pleasant.
Check out this FRED graph comparing income and new house prices: https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=... [1]
We see that the median income has dropped by $4,000 over the past decade while the price of a new house has jumped up by approximately $70,000.
As a recent grad with a decent job, there is still no way in hell I'm going to be able to afford a mortgage on any decent, middle-class house in a semi-urban area for a very, very long time, unless I want to move to Detroit or a similarly bankrupt/developing part of the US. I'm also speaking from a debt-free perspective: if I had come out of school with $100k+ in student loans, forget about it.
The only kind of jobs that are going to pay for good houses in the future are banking/tech/fortune 500, which have median salaries of ~60k right out of school and a well-compensated track to climb. These jobs are becoming increasingly scarce and hard to obtain, especially with competition from out of country talent.
I wouldn't be surprised at all to see my generation (I'm 22) having an extremely low & delayed demand for purchasing housing, and to eventually see what is happening in Detroit (houses abandoned, rotting away [2]) happen on a smaller scale across the country where there is too much housing supply for too little demand.
And no, prices will not equalize to accommodate lower salaries because real estate always appreciates in the long run...right? The Chinese, Canadians, Mexicans, Indians, and British seem to think so: foreign investments in US real estate totaled $108bn over the past year, or 8% of total existing home-sales dollar volume. Unsurprisingly, they are "spending more money on fewer homes," aka they are driving real estate bubbles in major cities such as NYC and SF. [3]
So we'll see a bunch of late 20, early 30 something's living together, splitting the rent in what would have once been a 4-6 person family house in order to make ends meet/be close to work. Maybe they'll even drive for Uber on the weekends. Welcome to the sharing economy.
[1] Note that I placed the data on separate axes so the scale might not be what you expected.
[2] http://www.motherjones.com/photoessays/2010/10/detroit-house...
[3] http://realtormag.realtor.org/daily-news/2015/06/18/foreign-...