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Real Estate Realities: Generational Housing Challenges & Solutions

Hands with gold cuffs that have a house and car on them

Are you still feeling stuck in your home? The Wall Street Journal recently addressed this issue, but it's more complex than it seems. We’ll look at the three diverse groups living the American dream in distinct ways. From the 'genuinely stuck' to the 'stuck in the American dream' and the 'unstuck group,' we unravel their unique challenges and share solutions. We also uncover the challenges affecting home sales, affordability, and ownership, revealing how they impact millennials and more. Whether you're a renter, someone stuck in the American dream, or part of the 'unstuck group,' our insights can help you navigate the housing market.


American Dream Realities: Three Diverse Groups

The Wall Street Journal discusses a particular group that feels trapped in their homes and is losing touch with the American dream. However, I believe there are two additional groups that the Wall Street Journal doesn't mention.  I think there's a total of three different groups in America and quite frankly, living the American dream in different ways right now.


The first group, which the Wall Street Journal article doesn't cover, is what I consider the "genuinely stuck" group. This is essentially what many people refer to as #RenterNation, and they are struggling significantly with the increasing costs driven by inflation and higher housing expenses due to their lack of homeownership.


They are affected by the ongoing inflation, which continues to raise rent prices, and they face challenges in saving money because their disposable income keeps shrinking each month as inflation persists, yet they don't have enough money to save up for a down payment to purchase a home.


The second group mentioned in the Wall Street Journal article is characterized as being “stuck in the American dream”. Financially, they are doing quite well. They find themselves in a situation with a low interest rate, possibly because they purchased or refinanced when interest rates were in the high 2s or low 3s. This results in an ultra-low mortgage and a high income.


Although they have more disposable income, they feel confined within their homes. They are unable to make the changes they desire, such as moving to another state for a new job, selling their home to create an extra bedroom for an expected child, or downsizing, which could lead to higher mortgage payments. So, financially, they are well off, but they’re encountering obstacles in their journey towards the next step in their pursuit of the American dream.


The third group, which I refer to as the "unstuck group," consists of baby boomers, the older generation, or anyone who has reaped the benefits of inflation and asset appreciation. These individuals have the capacity to make cash payments for new homes. They can also capitalize on the current market conditions by taking advantage of available deals to make cash purchases for investment properties, or find their new residence in a retirement area, potentially just find savings in an economy on things that other people aren't buying right now.


These individuals are thriving in the current economy and, to be frank, they are the ones driving economic activity by continuing to spend. We are not currently in a recession because they have substantial cash reserves, which they are actively putting to use. Consequently, one of the key reasons for the persistent high inflation is the presence of this population segment with significant cash at their disposal.


Challenges in Home Sales, Affordability, and Ownership

Due to these factors, home sales have declined to levels not seen since the 2008 financial crisis, and there's no indication of improvement in 2024. As a result, a significant number of millennials are returning to live with their parents, with one in eight millennials making this choice due to the impact of inflation and rising apartment and housing costs.


In addition to the housing affordability issue, homeownership rates are currently at a 50-year low. The challenge lies in the potential for increased money printing in response to a possible war and the need to manage existing debt. Such monetary expansion may further drive inflation. With that, we are likely to witness higher interest rates, which means that affordability, already at a low point compared to historical levels, may continue to deteriorate over the next few years.


Josh’s Advice

I have recommendations for each of these three groups but if you're looking for a recommendation for your particular situation, we're here to help. Shoot us an email at realestate@coastallife.com or set up your free consultation here. 


#RenterNation & Millennials - My top recommendation is to meet with us and explore ways to enter the housing market. This could involve co-lending, engaging in 'House Hacking' by purchasing a home with another person, or considering properties in more distant locations from the city. Whatever it takes, the goal is to start building equity before the next wave of inflation. I strongly advise taking steps to become a homeowner.


'Stuck in the American Dream' group - In your situation, you're essentially at a crossroads. You have a choice between maintaining a comfortable lifestyle with a low-interest rate, even if it means staying in a job, city, or home that isn't your ideal preference. You'll need to weigh this against pursuing your dreams, which might involve relocating to a new city, purchasing a larger home with an additional bedroom, or downsizing. Ultimately, this decision is a highly personal one, and only you can make it. We can certainly sit down with you to provide advice tailored to your specific circumstances and help you evaluate your options.


Baby Boomers & Unstuck Group - I have two primary recommendations for you. Firstly, consider taking advantage of the current real estate market, particularly the opportunities available in new construction. This could involve investing in a property that has the potential for long-term profitability. My second recommendation pertains to those with children or grandchildren who may fall under the millennial generation or are prospective homebuyers. A wonderful way to contribute is by gifting them funds to facilitate their entry into homeownership. This not only helps them initiate the process of building wealth but also creates the potential to pass on a legacy to future generations, including your grandchildren and great-grandchildren.

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