The American dream of housing has been shattered

Cut to 2020 and that narrative was flipped. It wasn’t that Millennials didn’t want houses in the suburbs, they just couldn’t afford them. But when the pandemic hit and demand for property exploded, the anger was fueled by people in their 30s, who finally lost years of jobs left to them by the Great Recession, and, for many, eager. escape to the wide open spaces of suburban life.

(Plus, it didn’t hurt that skyrocketing stocks meant Baby Boomer parents with large investment portfolios were happy to pass some of those gains on to their beloved Millennial children.)

As this 2020 housing boom begins to wind down, those who managed to close on a home against competition fueled by lower mortgage rates should be very lucky.

Here’s the deal: On Thursday, a new report showed that just 26 percent of all home buyers in the year ending in June were first-time buyers — the lowest in the four decades the National Association of Realtors has been conducting its survey.

For a historical comparison, the share of first-time buyers has been between 30% and 40% in the last decade. In 2009, in the middle of the Great Recession, it was 50%.

More bad news for Millennials and young Gen Zers looking to buy their first home: The average age of a first-time buyer is now a record 36, up from 33 last year.

It’s not hard to see why: first-time buyers save less money and don’t have the equity that repeat buyers do.

“They need to save more while paying more for rent, as well as student debt, child care and other expenses,” said Jessica Lautz, NAR’s vice president for demographics and behavior. “And home prices were going up this year, while mortgage rates are also going up.”

Oh, and one more thing: In addition to rising mortgage rates, home prices also rose, with the median hitting $413,800 in June. (Imagine the early start clocking at 400k!)

All of this also drives up rental prices as potential buyers choose to keep saving for (hopefully) a down payment.

MY TWO CENTIMOS

The house is broken. I don’t have a silver bullet, but it’s clear that inventory restrictions and outdated zoning restrictions are a big part of the problem.

“Policies governing land use and housing production make it very difficult to add more housing in desirable locations,” writes Jenny Schuetz, an urban economist at the Brookings Institution.

The United States, he believes, has failed to build enough housing, and continues to build too much housing in the wrong places.

Instead of rebuilding in existing neighborhoods, the housing supply has been expanded through “extended single-family subdivisions on the edge of the city.” This puts more people and homes in environmentally vulnerable areas, such as the wildfire-prone regions of the West.

As affordability reaches crisis levels, now is a good time to rethink the way federal and local governments pursue the American Dream. But that will only happen if those who benefit — Millennials and Gen Z — are better represented in elected office. As Schuetz says, the upper-middle-class boomers in power today are understandably reluctant to change the system that got them to where they are.

NUMBER OF THE DAY: 75

Seventy-five basic points: All the cool central banks are doing.

Following the Fed’s fourth hike of 0.75 percentage points, the Bank of England followed suit on Thursday by raising its key interest rate by the same amount – the biggest increase in 33 years. The European Central Bank did the same last week.

(Side note: “Basis points” is how central banks talk about rate moves, which usually happen in small increments. One basis point = one-tenth of a percentage point).

THE EVE OF WORK

Tomorrow, when the Bureau of Labor Statistics releases its October jobs report, it will be the last important reading on the economy ahead of the midterm elections, capping a week of new data showing only tentative signs that the labor market is on the upswing. to cool

Watch here: The US economy is expected to have added 200,000 jobs last month, down from 263,000 in September but above the pre-pandemic average. The unemployment rate is expected to rise slightly, from 3.5% to 3.6%—still near a half-century low.

But – there’s always a but – which, in the Fed’s view, is not great news. And next week could be very bad news for Democrats.

The Fed’s most aggressive monetary tightening in modern history – while raising mortgage rates above 7% for the first time in 20 years, slowing business growth and reducing household spending – has hardly disappointed the labor market.

In normal times, that’s news worth celebrating. But in the booming economy of 2022, it is a cause for concern as it suggests the economy is overheating. That’s partly why the Fed announced a fourth rate hike of three-quarters of a point, the latest in an aggressive move that would have been unthinkable just a few months ago.

Another strong jobs data will reassure the Fed that the labor market can withstand more rate hikes.

The Fed would absolutely love to see everyone keep their jobs and see some “softening” in the labor market: a slowdown in wage growth, say, or a reduction in job openings.

But realistically, when the Fed raises rates, employment (eventually) falls.

Analysts generally say the odds of a recession are high, if not guaranteed. But the Fed is betting that the pain of a recession (and the resulting job losses) is better, in the long run, than the pain of runaway prices.

Unfortunately for Democrats trying to hold on to power next week, the pain of inflation seems to be overriding any positive feelings about job security. According to a new CNN poll, three-quarters of voters already feel the country is in recession.