How do I buy a House?

My wife and I are in the beginning stages of thinking about buying a house. This process for us looks a lot different than it did for my parents or grandparents.

Millennials are facing the most overinflated housing market in recent history. Correction: it’s overinflated based on what is just and moral (and I’m going to leave those terms undefinined), but it’s probably about right when it comes to supply and demand of a hot commodity. Let’s address a few canards people throw at my generation about this issue:

  1. Stop spending money eating out and on coffee shops: yeah, maybe we do this too much. But millennials are consumers of experiences moreso than products. The experience of a hot coffee at a sidewalk cafe or a fresh, high quality meal at an atmospheric restaurant are things we’re willing to shill for. And while these things are eating up a portion of our budgets, it’s nowhere close to what our housing expenses are consuming. And since when did living a spartan existence on rice and beans become the only ticket to homeownership? The very point of the post-War settlement (GI Bill, generous tax breaks to homeowners, etc.,) was to make homeowning normal and financially available for the majority of the population.
  2. Quit complaining and save up for a downpayment: in a housing market like Nashville, a downpayment sufficient to keep you from the PMI penalty is upwards of $45,000. Think about this: a lot of millennials don’t make much more than that per year (even many who went to college and have master’s degrees). If you could save $10,000 per year, it would take you around 4 years to hit that mark. And don’t forget: during this time, you’re still putting out at least that much per month in rent. So you’ve got to pay $40,000 to save $40,000. Because if you’ve got a family, you can’t just live anywhere: you’ve got to go somewhere relatively safe, and that quality commands a premium in rent.
  3. Get out of the expensive cities and move where it’s cheaper: ha, great idea, except for the fact that the only jobs that pay even close to enough money to live are IN the cities. We have transitioned to a metropolitan economy. If you want a high-paying “creative class” job, you have to be in a metro area. Wake me up when this telework revolution renders all that obsolete because I’ve yet to see it, even in the pandemic. You’re always going to have to be at least close to a major metropolitan area. And say you take this route and move into the suburban hinterland. You’re now faced with upwards of hour-long one-way commutes (which racks up your gas and car payment/maintenance costs–you can’t be depending on an old n’ busted with that kind of mileage before you every day). Also, millennials are done with the suburban experiment. Sure, we’re buying suburban homes (because that’s all there is), but we want to live in cities, in neighborhoods. We want to live and play where we work. Two hours per day of commuting, plus coming home to sprawltown, should not be anyone’s fate.

We have a housing shortage. I think that’s the main problem. And the sickening thing is that there are more forces arrayed against remedying this issue than can be imagined. Our whole pattern of development has constricted land use so much that, when you combine it with significant regional and national immigration, the upward price pressure is astronomical. A functional society would recognize the plight and either launch on an unprecedented building spree or try to systemically induce either deflation in housing prices or (better yet) inflation in income with some kind of restriction on housing price infation. But our system is such a shadowy nightmare web of unseen forces and interests that that will never happen, unless some kind of crash occurs. The other fact is, which I’ve learned from Strong Towns podcasts, is that we all benefit from the real estate bubble as well. If you’re an owner, you have every incentive to root for a rising market and to oppose developments that might affect “traffic” or “character.” If you’re planning on retiring one day, you also do, because there’s a good chance your retirement is at least partially based on real estate investment.

But this can’t go on. We may sacrifice savings and make adjustments in the here and now, but in 30 years, when the millennial cohort has NONE of the savings and accumulated wealth that the boomers have, expect chaos. Right now that Bank of Mom cushion is getting a lot of house-less millennials over the hump. But that wealth will evaporate with the boomers, and when the children of the millennials need help to afford a downpayment, they will come up empty-handed. Living paycheck to paycheck because you’re spending 50% of your income on housing will keep this economy afloat for as long as SOMEONE still has wealth. But as those somebodies become nobody but the top tier of the population in the coming decades, look for major gears to stop turning in this country.

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