11/19/2022
Interesting perspective from one of New York’s top real estate agents!
This article came out in The New York Times a few days ago, and I wanted to share my thoughts.
First of all: obviously; this has been happening for years.
But, what we all need to understand is that this has been happening for three major reasons:
1. The Cost (and Value!) of a College Education.
"Older, white and wealthy home buyers" – which, let's call it what it is, the baby boomer generation – had much easier access to college education (on a cost basis) than millennials and Gen Z do today.
For example, in 1970, Harvard University cost $4,000 per year. Adjusted for inflation, that's about $30,000 in today's money.
YET, today, a year at Harvard costs about $80,000.
Now, I know that not everyone is going to Harvard... but, I think that this still serves as a strong example of how college tuitions are outpacing inflation by almost 3X since 1970!
And, at the same time as we're witnessing tuition prices go through the roof, the value of a college degree is decreasing dramatically.
People used to go to college with the tacit promise of getting a job that would help you pay off any student debt (that you might have had) and set you up for a fantastic, fruitful career where you could "climb the corporate ladder."
But that promise no longer exists...
Going to college and going SIX FIGURES into debt no longer guarantees that you will graduate with a job lined up where you can pay off your loans (at least not in a reasonable period of time).
I mean, the federal student loan portfolio currently totals more than $1.6 TRILLION, owed by about 43 million borrowers.
2. Increases in Compensation Compared to Expenses.
Over the past few decades, the middle (and lower) class have watched their expenses climb year-over-year, meanwhile their incomes hardly keep up with inflation.
We've all heard that "wages have been stagnant for years," and it's because it's true!
As such, it's becoming increasingly difficult to do things like save for a downpayment... an issue that the baby boomer generation can't really relate to.
Sure, the baby boomer generation still had to be fiscally responsible if they wanted to buy a home, but they didn't have nearly as many hurdles as Gen Z and millennials do today.
3. Housing has become wildly expensive.
From the 1970s to today, according to the Consumer Price Index, the cost of goods has increased about 644%, which isn't all that bad for a ~50 year time frame. After all, a little inflation (~2% per year) is actually good for the economy.
However, during that same period, the average home sale price has increased by over 1,600%!
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So, in summary: yes, this article is true.
But, it's not the upper class that's getting crunched, and it's not necessarily the lower class either (although, they're always getting crunched).
In this case, it's the middle class.
And look - I don't care what political party you vote for, but the middle class is consistently getting left behind.
THAT'S why we're seeing headlines like these.
