America’s housing dream is broken

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A little over a decade ago, the dominant narrative about the housing market was that Millennials just weren’t buying. They were either too cheap, too lazy, or itinerant to do something as heavy as a mortgage.

Cut to 2020, and that story has been turned on its head. It wasn’t that Millennials didn’t want homes in the suburbs, they just couldn’t afford them. But when the pandemic hit and demand for property exploded, the frenzy was fueled by people in their 30s finally cooling off after years of walking away from the jobs left behind by the Great Recession and, for many, wanting to escape the wide-open suburban life. territories:

(It also didn’t hurt that skyrocketing stocks meant Baby Boomer parents with large investment portfolios were happy to pass on some of those gains to their beloved Millennial kids.)

As the housing boom of 2020 begins to wind down, those who were able to close on a home amid competition fueled by low mortgage rates should consider themselves extremely lucky.

Here’s the deal. A new report on Thursday showed that first-time buyers made up just 26% of all home buyers in the year ending in June, the all-time low in the four decades since the National Association of Realtors conducted its survey.

For historical comparison, the share of first-time buyers has been between 30% and 40% over the past decade. In 2009, in the middle of the Great Recession, it was as high as 50%.

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More bad news for young Millennials and Gen Zers hoping to buy their first home; the typical age of a first-time home buyer is now a record 36, up from 33 last year.

It is not difficult to understand why.

“They have to save by paying more for rent, as well as student debt, child care and other expenses,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “And faced with rising home prices this year, while mortgage rates are also rising.”

Yes, another thing. In addition to rising mortgage rates, home prices also rose, hitting an average of $413,800 in June. (Imagine your starting house is 400 grand.)

All of that also drives up rental prices as potential buyers choose to keep saving (hopefully) for a down payment.

MY TWO CENTS

The apartment is broken. I don’t claim to have a silver bullet, but it’s clear that inventory constraints and outdated zoning restrictions are a big part of the problem.

“Policies governing land use and housing production make it extremely difficult to add more housing in desirable locations,” writes Jenny Schuetz, an urban economist at the Brookings Institution.

He argues that the United States has failed to build enough homes and continues to build too many homes in the wrong places.

Instead of redeveloping existing neighborhoods, the housing supply was expanded “through single-family subdivisions on the urban fringes.” It’s putting more people and homes in environmentally vulnerable areas, such as the wildfire-prone regions of the West.

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As affordability reaches crisis levels, now is a good time for federal and local governments to rethink the shape of the American dream. But that will only happen if those who benefit—Millennials and Gen Z—are better represented in elected office. As Schuetz argues, the upper-middle-class Boomers now in power are understandably reluctant to change the system that got them where they are.

Seventy five base units. All cold central banks do this.

In the wake of the Fed’s fourth consecutive 0.75 percentage point hike, the Bank of England followed on Thursday by raising its own key interest rate by the same amount, the biggest increase in 33 years. The European Central Bank did the same thing last week.

(Side note: “Basis points” is how central bankers talk about moving interest rates, which usually happen in small increments. One basis point = one-tenth of a percentage point.)

Tomorrow, when the Bureau of Labor Statistics releases its October jobs report, it will be the last major reading on the economy before the midterm elections and will cap a week of new data that suggest the labor market is showing only tentative signs. cooling.

Watch here: The US economy is expected to have added 200,000 jobs last month, down from 263,000 in September, but well above the pre-pandemic average. The unemployment rate is expected to rise slightly from 3.5% to 3.6%, still near a half-century low.

But — there’s always a but — that is, according to the Fed, not great news. And that could be very bad news for Democrats next week.

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The Fed’s most aggressive monetary tightening in modern history, which raised mortgage rates above 7% for the first time in 20 years, slowed business growth and cut household spending, barely dented the labor market.

In normal times, news like this is worth celebrating. But in the upside economy of 2022, this is cause for concern because it suggests the economy is overheating. That’s partly why the Fed announced its fourth consecutive three-quarter point rate hike, the latest in a series of aggressive moves that would have been unthinkable just a few months ago.

Another strong jobs data will only reassure the Fed that the labor market can withstand more rate hikes.

The Fed would absolutely love for everyone to keep their jobs and just see some “softening” in the labor market — say, a slowdown in wage growth or job cuts.

But realistically, when the Fed raises interest rates, it causes employment to (eventually) fall.

Analysts across the board say a recession is high, if not guaranteed. But the Fed is betting that the pain of a recession (and the job losses that will accompany it) is preferable to the pain of volatile prices in the long run.

Unfortunately for Democrats trying to hold on to power next week, the pain of inflation appears to be outweighing any positive sentiment about job security. According to a new CNN poll, three-quarters of likely voters already feel the country is in recession.

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