If No One Can Afford A Home... Who's Going To Buy Them?

Fewer young people than ever before will be able to own a home in their lifetime, as housing prices continue to rise... But, if no one can afford to purchase a house, how can they continue to rise in price?

A family home should be the foundation of your financial life; it provides you with a place to live as you create equity in a place you can one day call your own. In most places, owning a property with a thirty-year mortgage is less expensive out of pocket each month than renting, so if you can purchase your own home, you will be wealthy today and richer in the future.

You undoubtedly already know this, but if you are one of the seventy-five percent [75%] of my readership who does not own a home, it is most likely because you cannot afford one. According to a Redfin research, just 21% of homes listed for sale in 2022 were considered cheap, compared to 60% of homes listed for sale in 2021. That implies that in a single year, two-thirds of ALL affordable housing slipped out of reach for the typical American.

The study team determined that home affordability is at its lowest point in history. But what is the goal here? House prices cannot rise if individuals cannot afford to buy a property... Right? Wrong… I don't want to produce another of those ridiculous finfluencer videos about how the housing market will fall in three and five days, but there are three reasons why things may get a lot worse before they get better. The first argument is that houses do not have to be economical in order for you to own one. If you believe it doesn't make logic, consider that a whole industry is attempting to make it so. You don't save money to purchase a house; you save money for other things. Wages have not kept pace with property prices, but a 20% [20%] down payment rises at one-fifth [1/5th] the rate in absolute terms, so people may still enter the market. According to Zillow, the typical home sold in America in 2020 sold for $200,000 [$230,000]. The average house price in 2023 was THREE HUNDRED AND THIRTY THOUSAND DOLLARS [$330,000], a one hundred thousand dollar [$100,000] increase in less than three years.

According to Forbes, the average American earns $59,428 BEFORE taxes, which leaves them with a take-home pay of $49,000 after federal taxes and FICA. If the typical individual saved a preposterous SEVENTY percent [70%] of their take-home income to purchase a house, they would be equally as far away from their goal after three years because the average house's price climbed at the same rate as their savings. The typical household earns the same as the average person. However, most individuals just save for a down payment, thus seventy percent [70%] becomes fourteen percent [14%] or seven percent [7%] if the home has dual income and the other spouse gets the average wage.

That is still a significant financial commitment when 57% of Americans cannot afford a $1,000 [$1,000] purchase without incurring debt. Fourteen percent [14%] of your take-home earnings should be more reasonable than seventy percent [70%], but bear in mind that this is ONLY how much you would need to save JUST to keep up with price rises; it would not get you any closer to your goal of purchasing a home. Lenders and banks with a stake in real estate assets across the country recognize that this is still too difficult for most people who must also pay for food, rent, and other necessities that are surpassing salaries. So they've shifted the goalposts.

According to a research by the National Association of Realtors, the average down payment for a first-time house buyer was only SEVEN percent [7%], while the average down payment for a REPEAT buyer who had time to establish equity in their prior home was only seventeen percent [17%].

So, it's time to discover How Money Works to see if this circus can carry on forever.

00:00 Intro
00:43 The Down Payment Dilemma
02:18 The Changing Landscape Of Down Payments
02:55 The Decline In Home Sales And The Interplay Of Rental And Homeownership
04:30 The Longer Homeownership Stays
05:50 Interstate Migration And Its Impact And The Role Of Investors

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