The rising price of homes in major metropolitan areas has been a particular interest of economics observers during the last few years. After all, housing is a major political issue due to the economic status implications of owning a home in America.
At the end of 2019, Attom, a provider of real estate data, released its fourth-quarter 2019 report on housing affordability in America. It’s no secret that housing prices have been on the rise during the last decade. According to Attom, median home prices in the fourth quarter of 2019 were unaffordable for the average wage earner in 344 of 486 — 71 percent — of the counties observed in the report.
The prospect of homeownership is starting to seem out of reach for most Americans. The report revealed that the rise in home prices is already eclipsing wage growth in 76 percent of the markets that Attom studied. Obviously, younger generations of prospective home-buyers will have more problems in this environment. For example, in two-thirds of the counties studied, aspiring homeowners need to put down at least 30 percent of their annual wages upfront, as well as pay the fees associated with buying a home.
Although the American standard of living is quite high by historical standards, Americans still have trouble acquiring goods and services such as education, healthcare, and housing. However, some jurisdictions enable Americans to find more affordable housing arrangements.
Sun Belt states have built a reputation for being more affordable than the majority of the largest metro centers in America. This is no coincidence given their support of economic freedom and relatively lax land-use policies. Land-use regulations play a key role in restricting housing supply and making it more expensive for potential home-buyers. Easy money guidelines that the Federal Reserve has implemented have also generated price inflation over the years, as well.
When the money supply increases, a reduction in the purchasing power of a monetary unit inevitably follows. This combination of regulatory actions and central banking policies has put tremendous financial pressure on young professionals. The glory days of affordable housing seem to be a fading memory for the would-be upwardly mobile in big cities.
The good news for Americans is that these problems are not a matter of life and death. What is required is hard-nosed political action that addresses the underlying causes of the numerous problems that current generations are facing.
In the meantime, younger generations should proactively be educating themselves and their acquaintances on sound financial practices. Responsible individuals are a necessary precondition for building an economically stable society.
It’s key for younger age groups to resist the temptation of false promises from the government and instead rely on self-education and civil society to help them get by when economic uncertainty looms.