Few milestones in life mean as much to the American Dream as owning a home. And millennials have encountered the kind of trouble totally befitting their generation, which largely graduated into the teeth of the disastrous post-2008 job market. Just as they entered peak homebuying and household formation age, housing affordability is at 40-year lows, and mortgage rates are near 40-year highs.
The anxiety this generation feels about the prospect of never owning their own home affects their entire perception of their finances and the economy, says Moody’s chief economist Mark Zandi.
“If they feel like they’re locked out of owning a home it colors their perceptions about everything else going on in their financial lives,” Zandi says.
Millennials have long been dogged by a brutal housing market. They faced not one, but two, cataclysmic economic events—the Great Financial Crisis in 2008 and the pandemic in 2020. Both of which left them reeling financially and struggling to afford a home. The Great Recession decimated the real estate market as the economy nearly collapsed under the weight of tenuous mortgage backed securities. While the pandemic brought with it a remote work boom that caused millions of citydwellers to flee to the suburbs, sending housing prices soaring.
How does one budget their way out when the mortgage for a median priced house exceeds half your take-home pay for the month for a median household income?
Median home price in Sept: $412,000 Median household income 2022 (latest census data): $74,580 Today’s 30-year fixed rate mortgage rate est.: 7.30% Down payment assumption 10%.
So your monthly payment would be $3,121.60 while your monthly income before taxes is $6,215.
You’re spending well over half of your take-home pay after tax just on the mortgage payment for a typical household buying a typically priced house, which is not affordable even in this extremely generous example that ignores all other fees, insurance, and the fact that you’re on the hook to maintain that property.
Budget your way out of that?
Not trying to buy a small mansion as your starter home is a good place to start lol.
You do know what the median home is, right?
(Hint, the median priced vehicle, to compare to a similar market, is aprox a brand new off the lot sports car)
You are looking at the 50% mark, starter homes are in the bottom 20%, and it’s an exponential curve too.