Take a look at the relationship between living with your parents and home ownership
It is a really interesting commentary on what has happened to my generation when it comes to housing.
If you follow the blue line in the chart, you can see that home ownership rate ramped up dramatically in the middle part of the most recent decade, before beginning a precipitous dropoff thereafter. At the same time, you can also see that there is an inverse relationship with the percentage of 25-34 year olds living with their parents. I'm not sure how that statistic is counted, but it seems awfully high to me, rather shockingly, depressingly high.
I've felt for some time that for my generation, about the only option left for those who want the American Dream is to become hopelessly over-leveraged very early on in life. First, you graduate from high school, buy a car on credit (because it's so hard to commute or work in so many places without a car). Then you move on to borrowing nearly a quarter of a million dollars for a private college education. Then you borrow some sort of enormous sum, which in 2007 would have been about 160% of the normalized value of a home, and try to start work.
Unfortunately, this would then be followed by a dramatic recession, and the decline of 35% or more in value of both your education, and your home, leaving you with perhaps a half a million dollars or more in debt, an aging car, and a house you can't leave in an underwater mortgage, restricting your ability to chase jobs. If you're fortunate, you still have a job.
If, however, you chose to avoid these pitfalls (as I largely have), you may well have become locked out of higher earning potential careers in the future, and home ownership, and perhaps even a home of your own as you seek to maintain some semblance of fiscal responsibility during an irrational decade.
3 comments:
ben.
i get the first part, but not the second. how does avoiding buying a car, going to school, and owning a home limit your future earning potential? am i confused or missing something?
-amanda
Yep, that pretty much sums it up. Beginning adulthood heavily indebted is now the norm. We seek high-paying jobs to pay off the money lenders for the first decade or so of our working lives and thereby seriously compromise our ability to save for retirement. This is particularly vexing since generations x and y will not be able to rely on social security payments in their twilight years.
This week a frustrated 25-year old coworker was checking out his finances while at work. After seeing how much interest his account was accumulating each day, he slammed the table in anger saying "I swear to God, these bankers are whacking off to our misery." More likely they're summering in Nice, but still.
- Girth
You limit your earning potential by A) not paying for education, and B) not having a car, which affects your ability to commute to work. Owning a home can also do it, since it reduces your ability to leave to seek work elsewhere.
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