It’s no sin to offer good value. Americans are practical people. We’re betting most of those who duck into a Starbucks would be pleased to see some special deals on the menu.
What American does not like a good deal? At the same time, Americans tend to say that the market sets prices. So what happens if prices seem unfair or unreasonable?
Two recent phenomena highlight this tension:
Higher levels of inflation coupled with higher set prices. Is this fair? Sure, Americans keep buying during this time but they are spending more money on goods that used to be cheaper.
High housing costs. Americans want to benefit as homeowners from rising property values but do not like paying high housing prices.
Even as Americans do not have a right to good deals, they tend to have at least some companies willing to offer goods or services at prices lower than others. This does not always occur and there are situations – such as with monopolies – where the government will step in. Without intervention, individual consumers are left trying to find a bargain or going without in a country devoted to consumerism.
American presidents for at least 90 years have supported homeownership. See these thoughts from Herbert Hoover in 1931. So why not tie President’s Day in February to selling and buying homes?
February might seem a bit early to promote buying and selling homes. It is still cold in parts of the country. The school year still has months to go.
However, I have heard that the housing market tends to pick up after the Super Bowl. Warmer weather is on the way. Families might be more willing to move with less time left in the school year.
Americans like sales and shopping. Why leave President’s Day to mattresses and furniture? Why not kick off the home real estate market every year? Pepper the weekend with quotes from Presidents Obama and Bush. Find some quotes from Lincoln, Washington, and other famous presidents that seem to support the modern idea of homeownership. Match patriotism, capitalism, and holidays.
Central to the pitch of the American Dream is a house. Homeownership, the traditional thinking goes, is the surest way to build wealth. Save up for a down payment, buy a starter home, and definitely don’t spend too long throwing money away on rent.
That dream has become more fantasy in the Covid-era economy.
The second sentence goes a different direction. Buying a house is about making money. This might be in addition to other reasons for buying a home including: the status of owning a home; enjoying the home; maintaining and improving a piece of private property; and being a part of the community.
As a result, empty-nest Baby Boomers own 28% of large homes — and Milliennials with kids own just 14%, according to a Redfin analysis released Tuesday. Gen Z families own just 0.3% of homes with three bedrooms or more…
This is a change from the historical norm, according to the research. Ten years ago young families were just as likely as empty nesters to own large homes…
For those who own their home outright, the median monthly cost of owning a home, which includes insurance and property taxes, among other costs, is just $612, according to the report.
“Logically, empty nesters are the most likely group to sell big homes and downsize,” said Bokhari. “They no longer have children living at home and don’t need as much space. The problem for younger families who wish their parents’ generation would list their big homes: Boomers don’t have much motivation to sell, financially or otherwise.”…
This speaks to one of the assumptions of American housing: older adults are expected to move out of larger homes and move to smaller homes or ones that better suit their needs later in life. This frees up their homes for the next generation to move into.
Is this the way it has always worked? Might patterns change heading into the future?
Several thoughts on these trends:
Americans like bigger homes. As the size of American homes has increased, might Americans want to keep these larger homes as long as possible?
Houses are places to live and strategic investments. Older residents may not need all that space but wouldn’t they want to cash out as late as possible on this large asset?
An emphasis on living independently and youthfully may mean that staying in a house is a sign of vitality (while moving would be a sign of weakness). Why sell if you can still live in a big house?
This could be the product of a unique confluence of factors in recent decades: a sizable birth cohort, a change in what housing is and what housing is available, and an unprecedented growth in housing values.
UIC professors David Merriman and Rachel Weber, experienced researchers on property taxes and government finances who led the report, said this is one of the first attempts to measure the impacts of exemptions on the county as a whole. In total, $15.8 billion worth of property value in Cook County was unavailable for governments to tax in 2021 because of those breaks, their research found.
That translates into about $1.6 billion in tax revenue, which governments simply shift onto other property owners…
To respond to tax spikes or inflation, state lawmakers have expanded breaks over the past half century. They now include eight types of homestead exemptions: homeowners, seniors, veterans, people with disabilities and those making improvements on their home. Exemptions typically cut down the taxable value of a home to provide relief.
The report noted the effects of these exemptions are not the same in every community. The tax base of the community matters:
Those unintended consequences also aren’t the case everywhere. The effects of homestead exemptions are negligible in cities and villages with a bigger industrial property base, like McCook and Bedford Park, with a concentration of more valuable properties like Winnetka or Kenilworth, or with a lower share of homeowners who qualify, like Chicago.
It sounds like this affects communities that do not have great tax bases to start with. Already behind, homeowner’s exemptions then contribute to a lack of community funds compared to other communities.
The “American Dream” costs about $3.4 million to achieve over the course of a lifetime, from getting married to saving for retirement, according to a recent analysis from financial site Investopedia.
Meanwhile, median lifetime earnings for the typical U.S. worker stand at $1.7 million, earlier research from the Georgetown University has found.
Such figures underline the financial pressures that many families face trying to afford a middle-class life as expenses like child care, college tuition and buying a home continue to climb. The Investopedia analysis tallies the average cost of achieving other aspects traditionally associated with the American Dream, such as owning a house and raising two children to age 18.
Another analysis, from USA Today, found that funding the American Dream costs about $130,000 a year for a family of four. Median household income stands at about $74,450, according to the Census Bureau.
One key facet of the American Dream is that it is supposed to be available to all. That never meant everyone would achieve it, particularly as Americans often emphasize individual hard work and taking advantage of opportunities. But, it should be reachable in a society where many Americans value and see themselves as middle-class.
Perhaps this is why there is a market or demand for particular experiences that provide part of the American Dream or a taste of it. One traditional marker of the American Dream in the United States is owning a home. This is displayed on TV, illustrated in toys, and promoted by presidents. If people can just own a home, they have a strong case to make for attaining the American Dream. Or, consider the freedom of driving down the road in your vehicle to wherever you want. This experience offers a taste of the larger American Dream.
If large numbers of Americans cannot obtain the American Dream now and in the coming years, this could mean the Dream becomes redefined. Maybe it will have different elements. Or, perhaps it will be more commonly viewed as attainable only by some. It could be a status symbol of the elite. Or, new policies and conditions could renew aid and efforts toward achieving the American Dream. Politicians could run on this idea while grassroots movements could promote it.
Given the high cost of purchasing a home at the current moment in the United States, what can the President and the Executive Branch do on their own? In addition to supporting legislation for a new tax credit, the Biden White House has ideas about its own actions:
Brainard suggested that President Joe Biden will not wait for Congress. The administration, for example, said that it was advocating for zoning reforms that will help unlock the construction of affordable homes.
“Our Department of Transportation is making billions of dollars in low-cost loans available for developing housing near transportation,” Brainard said.
The administration has also been trying to help first-time buyers who have struggled to gain a foothold into homeownership. Home prices were nearly 6 times the median potential first-time homebuyer income in the third quarter, according to NerdWallet’s recent analysis.
The White House pointed out that it was trying to reduce costs for first-time buyers through the the Federal Housing Administration program. The effort, it said, helped reduce mortgage insurance premiums by 0.3 percent.
Many presidents from the early 20th century onward have promoted homeownership in rhetoric and policy. These proposed actions would continue this pattern. Could a president even if elected if they did not support homeownership for the masses? See great quotes in homeownership.
Of course, the President and the Executive Branch can only do so much in this area. Yet, a number of important changes to housing policy have come through this branch. Will Biden make a significant change or is this about temporary salves? All of these proposals do not alter the fundamental economic realities that make current homes so expensive. They offer incentives or help around the edges. Addressing zoning from a federal level could prove interesting as it is such a local matter.
The findings from one of the largest surveys done on these issues shows significant but varying support for 10 policy initiatives to encourage more housing. At the high end, nearly 9 in 10 (86%) say they would back efforts to expedite permitting processes, while at the lower end, about half (49%) support the concept of allowing smaller lots, and homes to be built closer together…
Support for most of the housing policies transcended the usual fault lines of political party, region, race, income, and gender. The eight most popular proposals received clear majority support from Republicans, Democrats, and independents. In addition, 9 of the 10 tested measures received majority support from both renters and homeowners. All of these policies have either already been shown to work in improving housing affordability in American cities and towns or have recently been enacted by state or city policymakers hoping to do so.
Some approaches that stood out as especially popular—earning support from more than 70% of respondents—are similar to state laws that have passed in recent years (although the survey questions themselves were not modeled on any particular laws). For example, in 2023, California, Montana, Texas, and Washington took steps to simplify permitting for new housing. In recent years, California, Massachusetts, Montana, and Utah have passed laws to enable more housing near commerce or transit. And Maine, Montana, Oregon, Utah, and Vermont, among others, have enacted legislation to allow houses to have an accessory apartment or dwelling unit, as have many cities…
Respondents also broadly supported the reasons behind efforts to create more housing, with 65% to 82% seeing each reason as excellent or good. (See Figures 3 and 4.) However, in some cases, Republicans and Democrats prioritized different reasons. For example, somewhat more Republicans (68%) than Democrats (62%) identified freedom for property owners as an excellent or good reason, while more Democrats (81%) than Republicans (49%) chose reducing racial segregation as an excellent or good reason. But large majorities of Democrats, Republicans, and independents see improving housing affordability and allowing more people to live near their preferred jobs and schools as excellent or good reasons to change housing rules to allow more homes to be built in cities and suburbs. Successful state-level efforts to allow more housing have consistently received bipartisan support, and the survey results indicate that people with different political views can come together to support policies to end the housing shortage and affordability crisis for different reasons.
Americans like the idea of owning housing. Add this to the current state of housing where both owning and renting is expensive and Americans broadly like more housing.
Thus, the expression of this majority for housing is difficult to put into practice. Even state laws are often fraught as it can run against local desires. Take the efforts in Illinois to promote affordable housing at the state level: the initial legislation had limited enforcement and more would need to be done for state-level policy to provide more housing.
As noted above, one of the routes forward that could gather more local support involves policies that provide more opportunities for current property owners. Adding ADUs, for example, provides a choice for current property owners to generate more income or provide housing for family. Other policies might be viewed as funneling money to outside developers or providing housing for people who would not be as welcome in the community. If policies can add housing units and enrich/protect homeowners, they might find more support.
The Zinnick’s aren’t alone: Older buyers are prevailing in America’s hot housing market. This year, the median age for a repeat buyer – someone who has bought a home before – was 58, according to data released Monday by the National Association of Realtors. That’s down just a smidgen from last year’s record of 59, but it’s up significantly from 36 years old in 1981, when NAR began conducting its survey.
Lately, grandparents have been edging out younger buyers who are struggling to get into the market for the first time. Nowadays, first-time buyers make up 32 percent of the market, well below an average of 38 percent since 1981, according to NAR. They’re also more likely to be in their mid-30s today, in contrast to their late 20s in the early 1980s…
There are many reasons. For starters, older buyers are also likely to be selling a house, which provides them fresh cash. Indeed, the typical home seller was 60 years old in 2023, according to NAR, the same as last year.
And with so few homes available, sellers often go with the potential buyer making the most attractive offer – be it a large down payment, stellar credit or all cash. There, too, older buyers have a leg up…
That often leaves seniors and aspiring first-time buyers competing for similar types of homes – just a couple of bedrooms, not too much upkeep. Usually, there’s a clear winner.
If you have the wealth from owning a home, you can then put that wealth into something else – if you so choose. So, if housing values have tripled to quintupled, there is plenty of resources to apply to a new home. The home gets turned into a new home (and perhaps leftover cash). One advantage begets another, what some have called The Matthew Effect.
In theory, this is how Americans expect homeownership to work: you purchase a home, you get to live in the home, and then at some point you cash out because the home offers a strong return on investment. But, as this story notes, this is not a good story for everyone. Others who might be competing in the housing market may not have the same resources. Or, not mentioned are seniors who have not owned homes or owned properties that did not appreciate much.
Is this just a blip in the grand scheme of things because of unique conditions in the housing market? Or, is this a long-term change where those who bought homes in the past now reap certain rewards? The outcome of this could help influence the life outcomes of a lot of Americans in the coming years.
Building on yesterday’s post regarding the growing homeownership rate of millennials, I wonder: how much do Americans today feel they deserve to be able to own a home? It is one thing to make a choice to buy a property, it is another to feel that the economic and social conditions render this difficult or impossible. Here are several factors complicating this issue:
The American social contract includes a house. Many Americans expect they should be able to purchase a home. I would guess that Americans and the American structures will continue to pursue and promote homeownership, even when it might be difficult. A big change might require a significant event or a steady long-term process moving toward different housing preferences and possibilities.
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