Have your toast and eat it too

There was a bit of a freakout yesterday because a young rich Australian guy scolded younger not-rich Australians for spending too much on avocado toast, telling them that they’ll never get to be homeowners that way. 

Obviously, young people are not frozen out of homeownership because of avocado toast, but because the places they want to live have very high home values. But, contrary to what much of the internet claimed yesterday, it’s quite likely that many more American millennials could buy a home than they assume, particularly if they get married and particularly if they move to slightly less desirable areas.

incomerent

One of the funny effects of the Internet has been an assumption that everything is the same everywhere. Because the Internet creates something of a universal culture, especially within the English-speaking world, there’s an assumption that economic circumstances are shared across countries equally. But the truth is that educated young people are in a much more advantageous circumstance in the United States, economically, than in most OECD countries. Incomes for full time employed, college educated American  20-somethings (and under 6 percent of young college grads are unemployed) are quite high- a median personal income of 43,000, according to the 2014 ACS. The median household income for this group, excluding households with nonrelatives, is 84,000. And rents and home values– outside of a few highly desirable locations- are nowhere near as high in the US as in the UK or Australia, while ample government supports for homeownership mean you can plausibly buy a decent if small house with under 10,000 in savings with a mortgage payment similar to the rents young people are already paying. While there are certainly areas of the country (the Bay Area, the DC suburbs, Brooklyn, Boston, etc.) where homeownership is mostly off limits except for the privileged few, it’s just not true that there’s nowhere with any jobs that anyone could afford.

average rentincome20ratio20

The approximate median home value in the country is under 200K (the median sale price is higher because of greater market activity in higher cost areas); there are lots of houses even in expensive states (maybe not California or Hawaii, but pretty much all of the other 48) for under 175K. I don’t doubt that many of the places that are more affordable are lacking in community and excitement relative to the places where young people flock, and the jobs they offer are less ideal. It may be that college-educated young people are choosing between isolation in nowheresville and semi-poverty in somewheresville, and are choosing the latter for good reasons. Just being around other appealing young people is often expensive, and is perhaps well worth paying for at some stages of life. But there are also real costs to society when, en masse, educated young people decide they can’t afford to start families or settle down.

9 thoughts on “Have your toast and eat it too

  1. I experience this in person with my friends who live in an expensive area and talk about how they can’t possibly afford to have kids (or more than one), but simultaneously talk about how they couldn’t stand to live in somewhere like, e.g. Savannah or even Miami.

    Although, as I’m sure you agree, the map would be even more interesting with things at the county level instead of state.

    Liked by 2 people

  2. I just got back from visiting my brother in flyover country, just northeast of Kansas City. It isn’t as cheap as it is used to be, even there, but that part of the country is actually doing pretty well. The Ford plant there just added a few thousand jobs, a new gluten-free bakery just opened up, and the small town my brother lives in just got its first microbrewery.

    Ten years ago, I couldn’t have seen myself living there. Now, I actually could. I’m a different person than I was ten years ago, but small-town America is different than it was too. The kind of things that tend to appear in trendy urban locations are always slowly filtering out, but it feels like a lot of the best things can now be had anywhere.

    Of course, what you consider “the best things” probably varies a lot. The university town I live in has a symphony orchestra, a community theatre, and moderately well-known musical acts stop here on tour. Most of those things I wouldn’t miss much, but I think lots of people would.

    On the other hand, my brother lives much closer to a major city and a major airport than I do. All of those fancy things are a short drive away.

    Liked by 1 person

    1. I think most of what people value about cities aren’t the cultural amenities, but the kind of people who value cultural amenities (or even “the kind of people who value the kind of people who value…”)- it’s a Keynesian Beauty Contest!)

      Liked by 1 person

      1. Yes, this does ultimately seem to be what it is about, different tribes more than different venues.

        Like

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