Americans can’t afford to live in America: heartland edition

“America’s Housing Affordability Crisis Spreads to the Heartland” (Bloomberg) says that Americans with ordinary jobs can’t afford to buy houses or apartments all across the U.S.

“Financial Crisis Yields a Generation of Renters” (WSJ) notes that the median age of a home buyer is 46, the oldest ever recorded and homeownership rates for younger Americans “have fallen sharply.” The article notes “Home prices have outpaced wage gains.” Costs are up by 21 percent (after adjusting for the inflation that the government tells us does not exist) while income is up only 2 percent (2000-2017).

Related, from :

I talked with a guy recently who is involved in a $1.5 billion project to create 2,700 “affordable” apartments here in the Charlestown section of Boston (story). That’s $555,555 per apartment (less than 1,000 square feet on average) on land provided for free (city already has a housing project on the same footprint). Presumably these will be higher quality than whatever was built in Halifax in 1918.

[Note: poor people who are selected by the housing ministry to move into one of these apartments would actually be rich almost anywhere else in the world if they could only get their hands on the $555,555 capital cost as a direct grant instead of as an in-kind service! If they could also get their hands on the monthly operating cost and combine that with interest on the $555,555 they would be able to enjoy, without working, a middle class or better lifestyle in many of the world’s beach destinations.

How about folks who work at the median wage? That’s about $23/hour in Massachusetts (BLS) or $46,000 per year. NerdWallet says that someone earning this much in MA can afford a $258,500 house if he or she has saved $60,000 for a down payment, has a top credit score, and spends $0/month on food and other non-housing expenses. Zillow says $274,416 on a nationwide basis. So a dual-income couple in which both partners earn the median wage wouldn’t be able to afford one of these units without a taxpayer subsidy, even if landed were free and the unit were sold at zero-profit construction cost. The U.S. has apparently become a society in which Americans can’t afford to live like Americans!

But the caravans of folks streaming over the southern border and claiming asylum will surely be able to do better?

17 thoughts on “Americans can’t afford to live in America: heartland edition

  1. Despite 20 years of accommodative monetary policy, US’s debt to GDP ratio is actually very low at 110%. Japan has 300% more debt than GDP. People just need to get used to borrowing a much larger ratio of their income. They used to say owing 10x of your income on a mortgage was high, a long long time ago. It needs to be more like 1000x.

  2. If the average age of a first time home buyer is now 46, what does that foretell about their retirement savings? Those 46 year old’s don’t even account for the wave of folks with crushing student debt. Stagnant wages and radical income inequality is a bitch. Thank god 1 of 100 Americans are doing fantastic. All hail the benevolent job creators, we must bless them with tax cuts and more intrinsic advantages.

  3. Student loans, auto loans, credit cards and unsecured loans, plus relative wage stagnation and an economy that has rewarded the upper 10% of Americans to a staggeringly disproportionate extent. I like this article better because the charts and graphs are much more frightening:

    Check out the chart of student loan debt increases since 2003. Public in-state four year college tuition has increased by 549% (not inflation adjusted, but even with adjustment it’s a massive increase) since 1987. What has anyone gotten for that increase?

    The comparison between the wealthiest 10% and the bottom 90% is another reason why Elizabeth Warren and others are finding such a receptive audience despite the American Indian heritage thing. Look at the debt to asset ratio for the top 10%. The Journal does its best to put a smile on the numbers in a few places, but it contradicts itself in many ways and the overall picture is not cheery.

    “Taking on a mortgage to buy a house that could appreciate, or borrowing for a college degree that should boost earning power, can be wise decisions. Borrowing for everyday consumption or for assets such as cars that lose value makes it harder to save and invest in stocks and real estate that tend to create wealth. So the rise in consumer borrowing exacerbates the wealth gap.”

    The big banks are back in the unsecured loan business, but the article only cites data through 2011 which begs the question: “What about 2012-2019?”

    Reading between the lines, the middle class in the U.S. is not very resilient, and it isn’t surprising that people are scared, despite all the “good news.” In many ways we’ve switched one kind of debt (housing) for other kinds of debt that aren’t as useful in building long-term wealth. Although there is some loan forgiveness available for student loans, for most borrowers that’s an arduous process. Bankruptcy isn’t an answer, either, unless the law changes. Wait for that battle!

    As to your question at the end…

    It looks to me as though a lot of Americans who are going to be permanently leaving the middle class are going to be competing with a bunch of new Americans who will never get into the middle class. So everyone will be a lot poorer, together. It’ll all be like it was at the turn of the last century in the big cities and everywhere else, I guess. Then we can bankrupt the government with another $30 trillion in spending, reparations, and God knows what else and really, the best place to be is going to be elsewhere. Where will our tired, poor and huddled masses go? There’s no place left.

  4. Maybe people are choosing to rent rather than buy. There are some good economic arguments both for and against buying a home rather than renting.

  5. But the big shock – the really big shock – is yet to come, and it’s going to happen fast. As I’ve said before automation is going to wreak a lot of havoc. If you have $100,000 in student loan debt and are barely making it in the middle class, what are you going to tell your kids? “Honey, a third of the jobs in this country are going to disappear by the time you graduate from the most expensive high school in the United States?”

    The crime problems are going to be enormous. The social transformations are going to be even larger magnitude. Right now Republicans are talking a lot about the “great economy” in terms of Black and Latinx unemployment. Well, where are a lot of those jobs going to be in ten years?

    I don’t know how you run a university system like ours, with all of its exorbitant expenses. Look at what people are already willing to do to get kids into college even with the tremendous expense and a relatively strong job market. Those problems aren’t going to get better, they’re going to get worse! What happens when we eliminate 10 or 20 or 50 million jobs?

    Andrew Yang isn’t getting much respect from the Democrats and I think it’s because he’s the only one talking about the problem as though it means something. I think the Democrats want to let it happen and then make sure everyone comes to them for help.

    But have a look here: 83% agree “There are a significant number of jobs and careers that will not exist in America in 10 years due to automation and outsourcing.” It’s the biggest item of agreement, almost 20% larger than those who “Oppose Socialism.”

    Whether you think it’s true or not, I can’t think of anything else that 83% of the public agrees upon except, perhaps: “I would rather not drop dead today.” If that’s not a political issue to be talking about, I don’t know what is. If 83% of the people think automation is a problem and only 65% “oppose socialism” right now, what are those numbers going to look like in ten years? I’ve read the heartland is going to get hit the worst. We talk about the homeless problem in cities now. We hear a lot about how people in the middle class are struggling. And now we’re going to toss another significant percentage of the population onto what? I haven’t heard ANY Republican talk about this problem at all. Not one person.

    • “The crime problems are going to be enormous.”

      Should create demand for cops, jailers, prosecutors, defense attorneys; their administrative support; and all the necessary infrastructure, plant & equipment.

    • @Deplorable

      Yeah. We’re going to need ’em. This is the Marshall Plan country. Why are we letting our own country fall apart?

  6. Such is dynamics of attaining equilibrium. Those whose income depends on wages will have to compete with the emerging markets, and the standards of living are going to equalize by whatever means possible, including inflation, de-industrialization, taxation and regulatory choke-hold, and social unrest.

    I am not into conspiracy theories, but that’s just econ 101. There is no point for (larger) corporations to invest in the US since we are neither the most efficient producer nor the most dynamic consumer market. (I was just reminded of my favorite 2005 joke: these AA batteries are made in China but they are loaded with all-American electrons.)

    Our popular culture has been telling us for years that we are bound to be, in the chronological order: 1) smarter and more civilized, 2) more organized and more productive at making things; 3) more educated and creative, 4) enlightened proponents and missionaries (aka the influencers) of the most advanced language, culture, law, and social order, 5) just better at sales and marketing,. 6) being in possession of more capital(!) because–you know–the USD, 7) being successful rich landlords (since we live in the most desirable location).

    If we as nation decide to compete we have to acknowledge that this is hard and start doing it soon: there is no royal way in economics, not just in geometry.

    • Do you see that many positive messages in our recent popular culture? Those are wonderful ideals if we tried to live up to them, but just don’t see any of those things being upheld as desirable any longer. I think our popular culture is amoral when it’s not being immoral, subversive, debased and completely decadent, and our politics is more toxic than I’ve ever seen it in my lifetime.

    • >There is no point for (larger) corporations to invest in the US since we are neither the most efficient producer nor the most dynamic consumer market.

      But we have natural resources to exploit! And we have poor states desparate for money.

      That may be true for larger corporations but it apparently wasn’t stopping the People’s Republic of China from signing memos of understanding with officials in West Virginia pledging to “invest” 83.7 billion dollars over 20 years after they and the President visited the Forbidden City in 2017. That’s turning into something of a rattlesnake wrapped around an enigma for everyone concerned. Their state budget of West Virginia is around $4 billion a year and the jobs promises were in the tens and even hundreds of thousands, which workers and infrastructure would enable the PRC to crack millions of barrels of petrochemicals for ethylene along with whatever else they were interested in extracting and then ship it back to China.

      So it also looks as though American companies and other multinationals aren’t eager to invest in one of our poorest states, we’ll be sign MOUs with the Chinese to buy up large portions of West Virginia’s their natural resources, process them, and take them.

      All the sensitive contents and the detailed plans (such as they might be, nobody really knows) are under seal and little, as yet, has materialized.

      But maybe that’s the future.

    • And yes, I’m aware of Biden’s comments recently to the effect that there won’t be any more use for fossil fuels in West Virginia or anywhere else, but he said nothing about extracting them, processing them, and sending them to China so far as I know. Does he like the idea? Or is that going to be a big “No Comment?” Will the Chinese hire all union workers? Besides, what do those poor people in West Virginia have besides natural scenic beauty, the National Radio Quiet Zone, old John Denver songs and whatever remains of their natural resources?

      What a great idea to sign MOUs for Chinese companies to move in right next to the NRQZ.

      If I sound a little bitter, it’s not directed at you, it’s just astounding to me that we have these resources and we have the need and the technology and the people, but we’re thinking of letting the Chinese own them.

    • China’s “letter of understanding” is just about hedging risks. Our natural resources are neither unique nor the cheapest to develop. China has no qualms with child labor in s**thole countries, yet somebody forgot to tell that to AFL-CIO.

      How many billions have they invested in West Virginia so far? how does it compare with their investments in Africa and in Brazil? China has built a tremendous amount of infrastructure in Africa, so why not let them fix I-95?

      PS: I didn’t find that you sounded bitter at all. No need to apologize. We are discussing issuers that are not particularly pleasant. I do appreciate your input.

    • @M: Thanks, it’s one of those awful days. So far $0.00 from the MOU’s in West Virginia, but Joe Manchin is making hay out of it recently. He sounds so skeptical now! It’s almost as though he woke up from kind of deep fugue state and all of a sudden realized he didn’t like the deal. It will be interesting to see what happens in the next Administration, and if the Chinese are hedging. I’m not predicting anything — and frankly all the machinations are far above my pay grade — but the Trump Administration talked the deal up, nothing has been done, nobody knows much about it, Democrat Senators from West Virginia are now holding pressers expressing their phobias and skepticism of it, and we know upset the Left was that Trump made a lot of inroads in WV. If it falls apart completely it will damage Trump’s brand in West Virginia, because he talked it up so much. My qualms are just “throw up your hands in disbelief” small potatoes from the Peanut Gallery by comparison.

      It just frustrates me because we’re not doing more, right here at home, to help our own people. West Virginia has a lot of wounderful people who are dying. Their lives and their futures are imperiled. I’ve been there several times in recent years and I’ve seen what people go through. They want a future.

      Chinese investment in Africa is an entire universe unto itself, (but this is an interesting glimpse:

      “Being fairly acquainted with Nigeria’s tech scene and mobile money regulatory environment the last sentence jumped out at me—paying for things with WeChat is not something that is currently available to Nigerians as an option. I asked a couple of my friends in the Lagos tech scene how the Chinese were able to do this in Lagos and they simply shrugged and said ”they are running their own little country here.”

      You don’t have to search any further than the Drudge Report (lots of people are glued to it today) right at this moment to find a CNN Marketplace story about the “hellish” traffic jams in Lagos. Given their interest and investments thus far, I wouldn’t bet against them working hard to fix that problem, soon.

      I keep getting that lonely, sinking feeling that they’re going to be running their own little country here, too. Why would we let it happen? If they fix I-95, can we ask them to fix the traffic across the GWB, Throgs Neck, into and out of Long Island also? Expanding the Cross Bronx Expressway isn’t going to be easy.

      I’m exasperated today. I hope the President is paying attention, though, and really thinks things through, because the Chinese have a strategy and a lot of desire to do to us what no one has ever done to us before, and they have a lot of time. The United States is, to paraphrase an article I read recently, pulling strings that nobody knew existed in an attempt to counter them, but the Chinese haven’t really begun pulling theirs yet.

  7. And the truths start coming out. Real inflation which includes things people actually pay for has been running higher than Cola rate updates. It is the government lying to the American people. Healthcare and insurance costs are skyrocketing. College tuition. Housing costs. You can’t tell me that inflation is 2-3% with any credibility. It’s 10% while the average American gets a 1-2% raise (or none like I got last year). Our economy is being monetized and gamified, with market speculation in housing costs. The top 1% win, while everyone else just gets poorer. The insurance and taxes on my home will be just $400 a month less than my mortgage next year! When I retire, I may still be paying a ridiculous amount to live here. If you have $100 million in the bank, you can afford to diversify around the world. Chase the returns. Main Street gets priced out of living here.

  8. “But the caravans of folks streaming over the southern border and claiming asylum will surely be able to do better?”

    ripped from the El Paso shooters manifesto?

    • No, just a usual target practice.
      All DNC operatives must be shipped to GULAG now, to show them who is a real Nazi.

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