photo credit: newbuild.us

It bothers me every day that the cost of going to college has increased eight-fold from when I went to school – that’s right 800% –  yet work-study wages have only doubled from the time I mopped floors and loaded dishwashers. What does that say about affordability in general? And particularly, one’s ability to pay for housing.

With the March jobs report showing a considerable pullback in job growth compared to January and February, its effect on the already slow economic recovery is having far-reaching implications. Coupled with rising mortgage rates, inflation and home prices, “affordability” is becoming a scarce term especially when it comes to the housing market.

First Responders Find It Unaffordable To Live Where They Work

As a Trulia study noted, affordability is defined as a household spending no more than 31% of its monthly income on housing, assuming a down payment of 20% and a 30-year fixed-rate mortgage at current interest rates. The study pointed out that in America’s largest metropolitan areas, the cost-of-living has far exceeded what many workers in those cities can afford. No kidding. This is particularly problematic for first responders who must report to work on short notice, such as police officers and firefighters, where less than 20% in half-a-dozen major U.S. metropolitan areas can afford a home in their respective city of work. In San Francisco and San Jose, California, first responders could not afford over 90% of homes in those cities. This is a problem that is not going away.

Related Scraps Major Condo Project in Miami

Closer to home, the recently scrapped 298-unit Auberge luxury condo project by Related Group, located in Miami’s Arts & Entertainment District, gave us blatant evidence that a slow-down in the housing market is taking form. Related Group, South Florida’s largest condo developer, admitted that “taking a breather” was the best course to adjust to the slowing luxury condo market. Indeed, sales prices in downtown Miami have even slid 1.2% since 2014.

When it comes to wages, ATTOM Data Solutions released figures showing that since 2012, 96% of counties analyzed in their report have seen home prices rise at a faster pace than wages. An earlier report showed that U.S. Home Affordability has dropped an 8-year low citing the same combination of fast home price appreciation and slower wage growth.

I say hold on to your hats as we start on a new turbulent roller coaster ride that has downward trajectory.

From the trenches,

Roy Oppenheim

With the ongoing rift between the baby boomers and millennials, at times it seems like a war of blame for anything that goes wrong in today’s society. However, there is a striking similarity in mindset and adjusting to the realities when it comes to the housing market.

Here are the similarities between baby boomers and millennials:

1. Owning a home is still the “American Dream.” Despite all the challenges, a new Zillow survey found that millennials still believe owning a home represents the “American Dream” and even more so than Generation X and baby boomers.

2. “Price is King.” A recent article by the San Diego Union-Tribune detailed that millennials also believe in the old saying “price is king” when it comes to the housing market. For millennials who do own a home, affordability means they are trending towards living in the suburbs away from urban areas (despite the stereotype of prioritizing the experience of the “urban lifestyle” over building equity). This is similar to the suburban boom after World War II had ended when soldiers returning home chose to buy the cheaper suburban homes over the more costly rental apartments in the city.

3. Preference for single-family detached homes. According to a recent study by the National Association of Home Builders, although specific configurations vary, millennial and baby boomer home buyers prefer single-family detached homes with a shared priority on exterior lighting, ceiling fans and a laundry room on the main level.

4. Renting houses and living with roommates. The increase in rentals, as opposed to owning a home, and the need for roommates to compensate for the higher prices are not exclusive accommodations for millennials but have also extended into the baby boomer demographic. As NBC News reports, baby boomers have opened up to living with roommates not only due to increased rental fees but also, like many millennials, choose to do so for social reasons.

Thus, the proverbial apple does not fall far from the tree.

From the trenches,
Roy Oppenheim