What broke the American Dream for Millenials

[Signifyin(g)Monkey]

What broke the American Dream for Millennials | CNN Business

WWW.CNN.COM

---

Rachael Gambino and Garrett Mazzeo planned their financial life by the book: They went to college, paid down debt, saved aggressively, got married, bought a house, started a...

Things seemed so hunky dory in the 90s, though.  Since then…eh…

[Brian]

Very thankful my parents paid for my education so I didn’t have any debt leaving school. I will be doing the same for my daughter if she chooses college in US. 

[Reputator]

I read that yesterday. I was tempted to post it in the WSJ thread about American optimism as a counterpoint. Actually I'm not sure why I didn't. 

 

But yeah seems like millenials have spent basically the entirety of their adult years so far unlearning the wisdom of their parents. What was once unequivocal ground truth about how to live has collasped and been swept away by runaway socioeconomic inequality. Older people in our family literally don't understand how we're always broke and we can't put any money away for emergencies or expensive purchases.

 

In the early 80s my parents had jobs straight out of college and immediately moved into a house in their mid-20s as soon as they were married. But then they couldn't afford to put my sister and I through college, and even after explaining how so many college educated people I know can't get jobs in their field and are saddled with a mountain of debt, my mom has still always felt like I should get a degree because that will magically solve all our money problems. She just can't let go of that idea.

[CayceG]

This read makes me realize just how incredibly fortunate I am. I'm probably the one percent of one percent of people my age who didn't get a bunch of startup capital or fall back on a parents' rental property to live in after college but also made it out of the 2000s with not a lot of debt. 

 

My family grew up lower middle class/upper lower class. No government assistance that I know of (or that they spoke of). They didn't go to college. They owned a business and a house. The business failed. The house had a HELOC on it that got paid off within the last 5 years. They have no retirement to speak of. 

The lesson I learned from them wasn't anything they vocally taught--it was just that I wanted better for myself than what they had. I latched on to the requirements of the field I entered (civil engineering) which needed a bachelor's degree. And so that's what I got. That (with an interview set up by my college professor) got me a job. 

 

My brother wasn't so lucky. He had to have a job in college, whereas I didn't. His tuition was more. His degree was less specific. Our parents could afford to help him less than me. 

 

Quote

The 2008-2009 recession made entry-level jobs scarce. It also pushed older workers to put off retirement, gumming up the corporate path for younger workers. For years after the recession was technically over, unemployment remained higher than its pre-recession 2007 level, and wages stagnated.

...

The result was a Millennial wealth gap that was larger, relative to other generations. By 2016, families headed by 1980s-born Millennials were about 34% below

“wealth expectations” — the level economists would have predicted them to reach based on where earlier generations were at the same age

 

This is what I graduated college into. As an entry-level engineer I had all the makings of a white collar worker that would do just fine... and I have! But I started off low compared to the boomer or Gen-X equivalent and now compared to what a Zoomer starts at. In the last 13 years, I've made up a good amount, so I can't complain. Seeing what my younger coworkers are going through makes my heart go out to them. It's so tough out there and even though I entered the workforce "behind" in terms of salary, it's so much worse now for zoomers. 

 

Quote

Had they chucked out the traditional wisdom, they say they’d be in a much better spot financially.

It’s an “if only” thought that seems to haunt Garrett, who majored in economics and prides himself on being financially disciplined. If only they’d bought their house in 2019 instead of 2022 – even with no down payment – their monthly mortgage payment would have been lower.

 

When I got my job I began renting an apartment. I still have the fridge magnet they gave me where they wrote the monthly rent. It was $671 a month. The same unit now at the same complex starts at $1300. 

 

Another bit of good fortune... I bought my house in 2015 for just under $200,000. I didn't have 20% down payment so I sucked it up and paid PMI for a while. The mortgage payment was a little higher than what my rent at the time was, so I figured it would be worth it. During the pandemic house prices were through the roof and interest rates were rock bottom. I refinanced from 3.75% to 2.75% and the equity I had in my house zeroed out the rest of my PMI. My mortgage is less than rent for the apartment I first had. That wasn't really any skill on my part outside of having enough money to refinance and enough sense and boldness to pull the trigger on a refi when I did. 

 

But I'm stuck here! If I had a growing family or needed to move, I'd be fucked. 

 

I don't have debt outside my mortgage. My 10 year old car is paid off. I've paid off my student loans (which weren't all that bad because my dad works for the state and I got a discount on tuition). The flip side is that I'm not looking to have kids. My dating drought aside, there's no way I'd want to have kids because of the insane costs associated. Things would be much more difficult and close to the edge. 

 

 

 

 

The solution to all this is easy to spot but impossible to implement. More housing in the "missing middle" between (huge) single family homes and giant 5-over-1 apartment blocks. Free childcare. Free college. Universal healthcare. 

 

Ultimately, the American Dream was just that: an imagined fiction. The only thing we had to look at to see that dream was the experience of a good slice of the baby boomers generation. And then they grew up to run the world. And so the fiction became the ideal that hardly anyone could obtain. 

I count myself uncommonly lucky in that I'm doing alright. 

[Reputator]

1 hour ago, CayceG said:

When I got my job I began renting an apartment. I still have the fridge magnet they gave me where they wrote the monthly rent. It was $671 a month. The same unit now at the same complex starts at $1300.

 

Yup. Same here. Where we are now, because we rent from a private renter we can never move because what we get for $1235 would easily cost $2k+ anywhere else in Orlando.

 

Year before last my wife was finally able to ditch her beater car and now we both have decent running vehicles for the first time in our marriage. I cashed out some retirement to be able to get it, and pay off some debt, but the debt has only come back. We've slowly managed to get to a point where all our major needs are taken care of and we both have stable careers, but it's been a long road and it will be a longer road yet if we ever want to own our own place.

 

Kids are financially out of the question but we also don't really want any.

[legend]

The boomers.

[CastlevaniaNut18]

Sometimes I wonder how I do so well when so many others my age are in the gutter. I grew up lower middle class, parents worked in factories, didn't contribute anything to my college fund, but I got scholarships and the $30k of combined debt we had coming out of college(mostly his) was paid off in a year. I'm 36, with zero debt, mortgage is paid off, I put 25% in my 401k, plus other retirement accounts, and still manage to pretty well afford any luxuries I want.

 

I mean, yeah, not having kids is part of it and we haven't had any major medical struggles, so I know there's been a degree of luck, but still.

[Jason]

2 hours ago, CastlevaniaNut18 said:

Sometimes I wonder how I do so well when so many others my age are in the gutter. I grew up lower middle class, parents worked in factories, didn't contribute anything to my college fund, but I got scholarships and the $30k of combined debt we had coming out of college(mostly his) was paid off in a year. I'm 36, with zero debt, mortgage is paid off, I put 25% in my 401k, plus other retirement accounts, and still manage to pretty well afford any luxuries I want.

 

I mean, yeah, not having kids is part of it and we haven't had any major medical struggles, so I know there's been a degree of luck, but still.

 

High paying career field, plus DINK from basically out of high school, in a low COL area. Debt is a problem for people but this is primarily about the fact that housing construction never went significantly back up after 2008.

[marioandsonic]

I'm thankful most of my college debt was forgiven.  I'm making decent money, but I feel like I'm still one big emergency away from being on the streets.

[TheLeon]

The trick is to just have no hope or expectations. 

[CastlevaniaNut18]

2 hours ago, Jason said:

 

High paying career field, plus DINK, in a low COL area. Debt is a problem for people but this is primarily about the fact that housing construction never went significantly back up after 2008.

Hell, I’m doing better than most of my coworkers. 

[Jason]

16 minutes ago, CastlevaniaNut18 said:

Hell, I’m doing better than most of my coworkers. 

 

Yeah but that's probably about them making bad financial decisions. How you'd be doing elsewhere depends on when exactly you bought your house. But even if you bought a house right before the economy shit the bed in 2008, housing was way more affordable than it is now, and as long as you kept your job (which you would have as a nurse) you would have been doing well for having gotten in then instead of now, plus you would have been able to get a major refi right after the crash.

[Jason]

But getting started today but in otherwise the same circumstances you'd be screwed on trying to buy a house in a place like Los Angeles or Boston, while you'd still be able to do it in Arkansas. 

[CastlevaniaNut18]

3 minutes ago, Jason said:

But getting started today but in otherwise the same circumstances you'd be screwed on trying to buy a house in a place like Los Angeles or Boston, while you'd still be able to do it in Arkansas. 

Which is why I’m still in Arkansas, despite the shit politics. 

[Nokra]

Where I live, Portland, OR, ranks as "only" the 21st most expensive US city to live in, according to US News & World Report, but the median house sale price here is $531,000 according to Zillow. Assuming the (outdated?) standard of a 20% down payment ($106,000 ), a 30-year fixed mortgage at 7.618%,  and following the (again, outdated?) guideline of housing being no more than a third of your income, you'd need to earn about $108,000 per year. And that excludes any insurance, HOA fees, taxes, etc.

 

The median household income in the US was $74,588 in 2022, according to the Census bureau. 

[CastlevaniaNut18]

9 minutes ago, Nokra said:

Where I live, Portland, OR, ranks as "only" the 21st most expensive US city to live in, according to US News & World Report, but the median house sale price here is $531,000 according to Zillow. Assuming the (outdated?) standard of a 20% down payment ($106,000 ), a 30-year fixed mortgage at 7.618%,  and following the (again, outdated?) guideline of housing being no more than a third of your income, you'd need to earn about $108,000 per year. And that excludes any insurance, HOA fees, taxes, etc.

 

The median household income in the US was $74,588 in 2022, according to the Census bureau. 

Damn, using Zillow, the median value for my city as a whole is $200k, but narrow it down to my zip code and it jumps up to $350k, which is about what Zillow estimates for my house. We paid $250k in 2014. 

[Ghost_MH]

43 minutes ago, Nokra said:

Where I live, Portland, OR, ranks as "only" the 21st most expensive US city to live in, according to US News & World Report, but the median house sale price here is $531,000 according to Zillow. Assuming the (outdated?) standard of a 20% down payment ($106,000 ), a 30-year fixed mortgage at 7.618%,  and following the (again, outdated?) guideline of housing being no more than a third of your income, you'd need to earn about $108,000 per year. And that excludes any insurance, HOA fees, taxes, etc.

 

The median household income in the US was $74,588 in 2022, according to the Census bureau. 

 

It's cool that I make more than that and had some $70k a few years back to put down on a $350k house, but couldn't get a mortgage no matter how hard I looked thanks to too much medical debt. Not that it matters now because all that money just vanished with the pandemic and I'm only now digging myself out of that hole. Also those $350k homes from 4 years ago are now worth $550k for reasons.

[CitizenVectron]

Yeah my wife and I are lucky (M39, F33) because we got married "late," don't have kids, have good jobs (household income $160,000), and live in a low COL area of Canada. Our 1960s bungalow was $370,000 two years ago, but would be over $1,000,000 in Toronto or Vancouver. Right now we have a five-year fixed mortgage at 1.29% and can afford the house on one of our incomes.

 

I mean, yes, we've made smart financial decisions and are good with money, but the big things that made us lucky are location and no kids, really.

[Nokra]

And just to address a potential counterargument: Yes, one does generally make more money in more expensive cities, but the median household income of Portland, OR is still only $85, 876 according to the Census bureau. 

[CastlevaniaNut18]

Yeah, doubling my income in California won’t do a ton of good when a house half the size of mine here costs 4x as much. 

[Brian]

Did it for my zip code and median is 1,078,232 up 11.9% yoy. We got lucky the house was a for sale by owner who had a double mortgage and wanted out quick. We bought in 2014 and the current Zillow estimate is about $350k higher than when we bought it. I doubt we will ever move at this point until retirement. 

[Remarkableriots]

Home Building Trends For 2024

YANKEEBARNHOMES.COM

---

Yankee Barn Homes is at the forefront of home building trends for 2024 with several concepts including prefabrication and virtual reality.

Quote

These tools help reduce costs, errors, and delays, and improve collaboration and communication among stakeholders.

 

Prefabrication and modular construction change how structures are built.

 

Green building helps tackle environmental issues. This trend involves the use of eco-friendly materials, practices, and designs that minimize the environmental impact of construction and operation of buildings.

 

Coming in the Not-So-Distant future: Living building materials will go mainstream. While it may sound otherworldly at present, the use of living organisms will become a part of mainstream building.

 

Live building involves the use of biological materials such as bacteria, fungi, algae, and plants that can grow, repair, and adapt themselves to changing conditions. These live materials will offer self-healing advantages such as biodegradation and carbon sequestration.

Hopefully, we can figure out a way to decrease the construction time of new homes and decrease the cost of building materials.

Opinion | Why Do We Build Houses in the Same Way That We Did 125 Years Ago? - The New York Times

WWW.NYTIMES.COM

---

Old-fashioned building methods contribute to the high cost of housing.

Quote

Last year, only 2 percent of new single-family homes in the United States were built in factories. Two decades into the 21st century, nearly all U.S. homes are still built the old-fashioned way: one at a time, by hand. Completing a house took an average of 8.3 months in 2022, a month longer than it took to build a house of the same size back in 1971.

 

The tantalizing potential of factory-built housing, also known as modular housing, continues to attract investors and entrepreneurs, including a start-up called Fading West that opened a factory in 2021 in the Colorado mountain town of Buena Vista. But Fading West, and similar start-ups in other parts of the country, need government help to drive a significant shift from handmade housing to factories. This time, there is reason to think it could work.

 

On a windy morning last month, I watched as wooden platforms the size of train cars moved down the Fading West assembly line, advancing to a new station every few hours as workers added walls and windows, wiring and insulation, dishwashers and cabinets.

 

The finished boxes are trucked to building sites and swung into place by cranes. Houses consist of two to four boxes. Once they’re knitted together, the result looks like a traditional home.

Final assembly happens so quickly that it almost seems like a magic trick. In Poncha Springs, a town 30 minutes south of Buena Vista, I watched as a crane swung a 19,894-pound box over a concrete foundation. A worker on each corner checked the fit while two more waited in the basement to connect it to the foundation. As it was secured, a truck arrived with the next box.

The team of eight workers has sometimes assembled four houses in a single day.

 

Fading West says houses from its factory can be completed in as little as half the time and at as little as 80 percent of the cost of equivalent handmade homes, in part because the site can be prepared while the structure is built in the factory. A 2017 analysis by the Terner Center for Housing Innovation at the University of California, Berkeley, found similar savings for the construction of three- to five-story apartment buildings using modular components.

Factory building has other advantages, too. It can reduce waste, maintain higher standards of consistency and produce homes that are more energy efficient. It is not subject to rain delays.

 

It also offers a solution to the home-building industry’s growing problems finding enough qualified workers, especially in high-cost areas. Manufacturers like Fading West can build where labor is cheaper and then ship homes to the places where people want to live.

 

In 2006, on the cusp of the most recent housing crash, factory builders produced more than 70,000 homes. Since the crisis and the resulting wipeout, annual production has not exceeded 30,000 houses.

 

The government also can push for the standardization of building materials and building regulations. Herbert Hoover, the great champion of industrial standardization, who during his years as commerce secretary in the 1920s worked successfully to establish uniform rules for products such as paving bricks, milk bottles and blackboards, argued that establishing consistent standards was the nearest thing to a free lunch. It would increase productivity, benefiting companies, workers and customers. Florida and California will always have somewhat different building codes, because hurricanes and earthquakes pose different challenges. But there is no reason for Colorado to have 300 different codes.

 

[TUFKAK]

2 hours ago, CastlevaniaNut18 said:

Yeah, doubling my income in California won’t do a ton of good when a house half the size of mine here costs 4x as much. 

Except we also get pensions, the ability to tax shelter 46k and great benefits 😝

 

But to the topic, it was a collection of things that broke it that began with our boomer parents directing us into avenues that ignored reality, aka a humanities degree is better than learning a trade, then due to the increased demand higher education increased prices to, at the time, mortgage level costs, and laws were passed making it impossible to discharge student loan debt. Starting behind to such a level massively hamstrings people’s wealth building potential.

Now combine it with a culture of consumerism that encourages over consumption and we add in useless consumer debt too. Then, even if you avoided those traps unions were busted and wages didn’t increase along with profits because capitalism. What we’re seeing is the point of capitalism, not an accident.

[outsida]

12 hours ago, CayceG said:

When I got my job I began renting an apartment. I still have the fridge magnet they gave me where they wrote the monthly rent. It was $671 a month. The same unit now at the same complex starts at $1300. 

 

Another bit of good fortune... I bought my house in 2015 for just under $200,000. I didn't have 20% down payment so I sucked it up and paid PMI for a while. The mortgage payment was a little higher than what my rent at the time was, so I figured it would be worth it. During the pandemic house prices were through the roof and interest rates were rock bottom. I refinanced from 3.75% to 2.75% and the equity I had in my house zeroed out the rest of my PMI. My mortgage is less than rent for the apartment I first had. That wasn't really any skill on my part outside of having enough money to refinance and enough sense and boldness to pull the trigger on a refi when I did. 

 

But I'm stuck here! If I had a growing family or needed to move, I'd be fucked. 

 

 

This is my situation, purchased a house in 2015 for $200k and I feel stuck. The homes around here start at $500k and the interest has doubled from what I had secured. Buying a new home would be a lateral move with a penalty of 3x’ing my mortgage payments, and that doesn’t could the increase in taxes!

[chakoo]

21 hours ago, CitizenVectron said:

Yeah my wife and I are lucky (M39, F33) because we got married "late," don't have kids, have good jobs (household income $160,000), and live in a low COL area of Canada. Our 1960s bungalow was $370,000 two years ago, but would be over $1,000,000 in Toronto or Vancouver. Right now we have a five-year fixed mortgage at 1.29% and can afford the house on one of our incomes.

 

I mean, yes, we've made smart financial decisions and are good with money, but the big things that made us lucky are location and no kids, really.

You need to multiply by 3 for Toronto or Vancouver. 1 mil will get you a 2 bedroom condo. Townhouse are near 2 mil and a house will run 3 mil+.
 

I paid a bit over 600k for my 1,350sqf condo in dt Toronto. It’s now worth about 1.3mil, so if I wanted a house in Toronto proper I would need to pay the price of an overpriced house in the states plus the proceeds from my condo. I’d need to move to neighboring cities and take a train to downtown to get a house for what my condo is worth. -.- I’m just thankful I got my older condo when I did because with newer condos, 2 bedrooms are usually only 1,000sqf and larger units are less common.

 

[Signifyin(g)Monkey]

Re:housing, Taking a broader macro view, I would say it’s more than just NIMBYism, it’s also the paradox of real estate.  Yes, population density is part of what drives up housing prices, but perhaps the biggest driver is actually the flow of investment.  The more people treat their homes as wealth vehicles, the more they invest in them rather than in other goods and services, the more it drives prices up, and the less affordable housing becomes for upcoming generations. (which coincidentally means those generations will need to borrow more to attain homeownership, which contributes to yet more appreciation) Historically, the only way to temporarily stop this cycle is through some kind of debt deflationary event.

 

Which is why, to me, the response to the 2008 crisis is the central quandary of the millennial generation.  Holding down interest rates so low for so long gave us a less brutal debt-deflation than we had in the 1930s, but it also propped up housing prices at increasingly unaffordable levels. (and gave us a bubble in corporate debt to boot)

 

There are several reasons housing was so comparatively affordable for boomers, but one huge one is the fact that the Great Depression drove real estate prices downward for an entire generation.  We didn’t let that happen this time around.

 

I’m not sure we should have, either, since the alternative could have been worse—Great Depressions tend to produce really bad things, like great wars—but that doesn’t mean we’re not (bad pun intended) paying a price for the choice that was made.

 

It would all be a lot easier if we as a civilization could just say “houses are for living in, and that’s all.”

[osxmatt]

I’m very fortunate relative to my millennial (1988) peers. I only completed two years of college and didn’t finish out my bachelors because I got offered a decent entry-level position at a FAANG company. I’ve been with them for 12 years now, and have worked my way through multiple promotions. 2023 was the first year I finished with six figures.

 

My wife and I purchased our home in 2015 for $179k. It was a brand new neighborhood, and now is worth north of $425k. My wife decided in 2018 when she was pregnant with our first child that she wanted to stay home. It has been hard at times with a single income, but we are able to make it work, even with our second child being born last June.

 

We used to joke back in 2018 that we would sound like boomers in 20 years, telling our adult children about how we bought a house for under $200k, and dad worked while mom stayed at home with the kids. We had no idea it would take less than 5 years to sound like that.

[GeneticBlueprint]

I watched this episode of the Simpsons again yesterday with my son. The episode as a whole--and this scene in particular--so perfectly encapsulates the boomer/millennial dynamic.

 

 

 

Oblivious boomer that stumbled into success | struggling millennial making much less, living with much less, and living in lower standards.

[Link200]

I made a spreadsheet a while ago to compare housing payments from the past with today. When you adjust for inflation the payments we make today aren't significantly different. This is something that does matter. Yes house prices skyrocketed but what we consider as "high" interest rates today was considered low a couple of decades ago. Housing payments recently have gotten more expensive since interest rates went up without a corresponding drop in prices but that currently is just a small blip in the data at this point rather than a long term trend. Especially since rates have been dropping recently.

 

As far as the article is concerned it lacks the proper information to know if this family's woes are due to their own doing or something else. People have a tendency to pay for things they don't need. A vast majority of people don't need an F-150 or big SUV but they suck up the $800/month payment so they can have one. A cheap car with a $300/month payment is enough to cover over 95% percent of what people do with cars. The money saved can easily pay for rentals when needed.

 

Yes I do realize some people actually use their trucks and SUVs for good reasons. Most people do not.

[elbobo]

So glad I had my forever home built in 2018