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.
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.
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.