nfinf.substack.com
Inspired by some of the conversations we had here about the experiences of previous generations (especially with /u/the_nybbler, and yes, I know you're not a boomer), I wrote up a post that challenges a common narrative of how good the boomers had, and how screwed the millennials are. Main point is that the houses were not that much cheaper relative to now, and the interests rates were murderous. Enjoy!
(I'm a regular poster here, but I wanted to separate the identities for opsec purposes).
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Notes -
As for the substance, I appreciate what you’ve done with the FRED data. A couple questions came to mind.
I think you’re making a mistake by dismissing complaints stemming from metro areas. Far more than half the country counts as “urban.” Effects on the major cities aren’t just hitting affiliates of the NYT, but the accountants, the waitstaff, the teachers, and whatever factories we have left. And the stability of medians can conceal a whole lot of distortion. Is it really reassuring if only 40% of the country has it worse than the Boomers?
Imagine Jeff Bezos sets his resources to scouring the housing markets. Any listing within 10% of the national median, he snaps up. He grabs as many as he can before the demand shock kicks in. Then he sits on them. Would-be buyers of these median homes are left looking at a gap. Even if the median price didn’t change, the intersection of “affordable” and “worthwhile” is now empty. It can’t be trivially filled, either, since new development takes time and more money.
That was a dumb example, but I think you’re missing something like it. Median payment over median income doesn’t tell the whole story. There’s got to be a reason why millennial habits are so different, and I’m not inclined to blame moral fiber.
If you were born in 1950, earliest you could practically consider buying a house is when you're 22-23, and by then the interest rates are already around 7%. The oldest boomers, born in 1945-49, saw rates around 6%, which starts being reasonable, but then again, "a small group of people born within 5 years interval lucked out into good economy" is not exactly a strong, well fortified position on the frontlines of generational warfare.
I'm not sure what you mean by this, can you elaborate? Do you refer to housing bubble collapse in the aftermath of GFC?
Boomers also had kids, had more of them, and at younger ages too. My thinking is that what matters is not your raw net income, but your willingness to commit to homeownership. Once you have kids, you'll be strongly motivated to spend on improving your housing situation, instead of getting a nice new car, going on nice vacation, or hanging out in bars buying heavily marked up booze.
I don't have easily available data to answer that, but I'm very interested in this question.
But does it really matter? This is why I focus on medians, to completely elide this problem. If half of the homes are affordable to half of the people, what kind of geographic distribution of incomes vs houses would make the practice mismatch the theory so much?
You're missing the point of taking medians. I do not dismiss urban areas as such (I never even use the word "urban" in my post). I dismiss a handful of very attractive metros, arguing that relatively few people live in those, so even if millennials living there are indeed screwed, they do not represent the experience of a typical millennial.
I think the bigger factor is that due to increased visibility and brand awareness, more millennials want to live in NYC or SFBA or similar, which on the one hand bids the prices there up even more, and on the other contributes to the feeling of unaffordability. If you grow up in Buffalo, NY, and you want to move out, you ask yourself: where? "To NYC" is an entirely obvious answer. Then you look up how much it costs to live there, and despair, but you find a job that allows you to barely make ends meet, staying with some roommates, and hoping for promotion. Of course, you'd be better off if you moved to place like Atlanta or San Antonio, but these places don't have NYC's brand.
Again, I think you need to come up with a better, more realistic model for this argument to make sense. In this example, Bezos creates artificial gap around the median, so what's left on the market is small cheap houses (e.g. 1bed condos), and expensive unaffordable mansions. In that scenario, yeah, people would be correct that they cannot afford a starter home that's viable to raise a family in. Is this what's actually happening? I am quite certain that the answer is "no".
As an interesting aside, Jeff Bezos is much too poor to affect the housing market significantly. There's something like $500M worth of single family houses just within a mile of where I live. He'd very quickly run out of cash if he started to seriously buy up housing.
I'm wondering what percentage of Boomers had bought before the rates passed, say, 10%. The last year below that was 1978.
Raw birth numbers for the Boomers are here. By my count, then, about 31M Boomers had turned 25 by 1978. That's on par with the number who'd reach that age between '79 and '85. Something like half of the Boomers would have been buying their first houses at 7 to 10%, not 12 to 15%! More if they were actually making the purchase younger. I could see that making a big difference in the generation's wealth.
Yeah, I was thinking the volatility of the post-2008 period might have disincentivized new buyers. It certainly changed the way house speculation was managed. But I'm not really attached to the idea.
This is where I'd like to see you include more data, because it feels like you're falling back on the stereotype. There's a tidy narrative where those rootless millennials lack discipline, but I'm not sure it holds up. Not compared to the effects of credential inflation, of the transition to a service economy, or these housing statistics. Are spending habits really more impactful than what might be a 20% increase in house payments?
My bad. I was trying to refer to urbanization rather than just true urban centers. The suburban metroplexes are more important than ever, and I don't know what fraction of them are reporting things like your New York examples.
No, I appreciate why you used the median. It's certainly more stable than the mean for what you're trying to show. But it doesn't solve the subgroup problem, because in theory, up to 50% of your population could be experiencing something very different. There's no way that happens in a vacuum, of course, but how big of a percentage is doing the complaining? More than half of the country is urbanized, so a lot of people have opportunities to witness the metro effects on housing. Even if they don't suffer from it personally, that's liable to shape a narrative.
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