The Housing Mess and 20-somethings

Sometimes I feel like I am surrounded by such stupidity in the common mainstream media that I want to barf all over my television when I see a report from the likes of Dateline or CNN.

I read an article about the housing crunch and why now is the time to invest in housing - and that the housing crisis has passed and that things have gotten a lot better. I chucked my fourth cup of Ramen noodles this week at my TV, livid and angry about the complete lack of understanding that the media seems to have about 20-somethings and the challenges we're facing at the moment.

I realize that the situation isn't as bad for others as it is for me. I was laid off in March of 2007 and STILL have not been able to fund a job that has paid the same amount of money or used the skill sets that I gained from my previous position. It's been 14 months since I was laid off. I've since moved back in with my parents. I'm a few months behind on all of my credit cards. My finance company is threatening to take my car. I lied on an application at a Subway restaurant and ignored the fact I have a Bachelors degree simply to get some income. I submitted the paperwork to file for bankruptcy last week. - I'm only 26 years old and I have over $195,000 in debt from college, my car, and credit card debt.

Igoring all of these factors, and the fact that a lot of 20-somethings are in the same situation that I am in, Maybe the best way to explain my disgust is to explain how I perceive the housing cycle, and then to further explain my thoughts on it. I am readily willing to admit I could be completely wrong here, but it seems like people's home buying habits usually follow this path in the United States:

1) Move out from home and get a starter apartment
2) Graduate College / Knock a girl up / Get Married (not necessarily after 1, could be before)
3) Purchase the "starter home", Condo or Townhouse - stretch yourself to the brink to afford this
4) Family Size increases/Lifestlye changes - upgrade home
4a) New Job / Change of Pace / Relocation / Change Lifestlye - Change / Upgrade home
4b) (again) New Job / Change of Pace / Relocation / Change Lifestlye - Change / Upgrade home
5) Kids grow up, empty nest, parents inhabit the nest for awhile
6) Downsize home as couple ages / Retires / Relocates

That means there are 8 possible changes in one persons or couples lifestyle in a lifetime.

Well, if this pattern is correct, that means that the two largest generations in the US: The baby boomers, and the baby boomer echo, are both making moves in the housing markets at the moment. The boomers are getting ready to downsize into more manageable homes as they age and have empty nests, and the echo's are also attempting to get a foothold into the market.

I know a lot of couples who devote 100% of one partners income into housing. I also know a lot of other people who have teamed up with three of their closest friends to purchase a house to gain a shared footing. This is the only way that a lot of the echo's are able to afford housing based on their limited salary options. In many areas, like Miami, Phoenix, San Francisco, Austin and Denver, the median home price is in excess of $200,000 for a four bedroom home. Even a more managable three bedroom townhome is running at least $180,000. I simply fail to see how a 20-something making $12 an hour or less is going to be able to afford student loan payments, credit card debt, a car payment and a house on that level of income. Global competition has meant that 20-somethings are facing competition willing to work for 1/6th of the cost of their American counterparts.


I think this leads to a significant irony that we haven't ever really seen in America. I think downsizing homes and having more affordable options is going to be the key for the future. These realizations, along with the fact that the Government is going to expect a 20 something to pay the highest social security taxes in history to support the boomer generation into retirement has led me to believe that the hosuing market will be anemic for some time. The reality is that housing prices are going to have to come down significantly more for my generation to deal with the excess glut of supply on the market. We're also going to need additional income to promote consumer spending that keeps the entire economy afloat.

Boomers hear this: The echo's are broke. We can't help you retire unless we have a roof over our heads.