Tag Archives: inflation

Today’s 30-Year-Olds Face Steep Challenges

The graph below, which comes from this Axios article, paints a pretty clear picture of the challenges being faced by today’s 30-year-old Americans:

being30.jpg

My kids – 25, 24 and 21 respectively – face a different economic reality than their mother and I did at their age in the early ’90s. On average they and their peers are earning the same amount of money as we did, but all of their expenses are higher. The result? Far fewer are getting married, having children or buying a home by the age of 30.

These trends are already having an impact on our country. At my day job I spend my time thinking about housing, the apartment industry in particular, and I can tell you that we’ve been seeing the impact there. That decline in the rate of homeownership you see in the graph above? That translates into more rental housing, which is obviously a positive thing for the apartment industry.

Even when they do get married, this generation isn’t rushing into parenthood mode. From the article:

  • Having fewer children: When Boomers were in their 20s, the fertility rate was 2.48, well beyond the replacement level of 2.1. Today, it is just 1.76.
  • When a recent survey asked why they were having fewer kids, most young adults said “child care is too expensive.”

And these folks are understandably more risk-averse than we were. After all they saw what happened during the great recession, when millions of people lost their “American Dream” homes to foreclosure. They are much more likely to wait until they know they’re financially solid before they venture into parenthood and homeownership.

So how do we fix this? Well, it begins and ends with household income. Until household income starts increasing at a faster clip than basic household expenses, we’re going to be stuck in place. Sure we can look at trying to control the costs of everyday life, but inflation is an economic reality so even if we reduce the rate of inflation we still need to make up lost ground on the income side. Easier said than done, but it’s something we must get serious about.

1980

This past Tuesday night was a busy one at the day job – we had our annual awards dinner and we rolled out a new name and logo for the organization.  The organization was founded in 1980 and as I prepared for my emcee duties I decided to do a little research so that I could do a little retrospective on what the world was like 31 years ago.  It was fun, especially since I was in 8th grade in 1980 and while I do remember things like seeing Jimmy Carter on the news, I was your average self-absorbed teen and really wasn't aware of what was going on in my parents' day-to-day lives as they made their way through life.  Here's a taste of what I found using various sites online — I'm not going to vouch for absolute perfection on the numbers, but they're all close enough to give you a sense of what was going on at the time:

  • Soviet Union was in Afghanistan
  • US boycotted the Moscow Olympics
  • Pink Floyd’s Another Brick in the Wall was top song
  • A bunch of people tuned into Dallas to see who shot JR Ewing and Bo and Luke Duke were driving around being chased by the dumbest sheriff ever born.
  • First fax machines were available in Japan
  • Average 30 year mortgage rate was 15.28%
  • Yearly rate of inflation was 13.58%
  • Median value of a house in NC was $36,000 ($101,000 in today’s dollars)
  • Average monthly gross rent in NC was $205 ($577 in today’s dollars)
  • Gallon of gas cost $1.19 ($3.35 in today’s dollars)
  • NC unemployment rate in March, 1980 was 5.2%

The first time I ever signed my name to a mortgage was in 1993 and I remember the loan officer telling me and my wife that we were really lucky to be able to get our sub-9% mortgage, and telling us what a wonderful thing PMI was so that we didn't have to put down more than 10% for our loan. I remember agreeing with him because I could remember my mom and stepfather talking about their wonderful 16% note just 14 years earlier (mainly because I was bored to death sitting at the closing for that purchase when I was a self-absorbed teenager).  I also remember sweating bullets as we were asked uncomfortable questions about payments that were a week late on store charge cards a couple of years earlier, and even about some late payments I'd had in college. You can imagine my shock when I started reading about no-look loans, and you can also probably imagine why I'm not particularly sympathetic to those who get their panties in a twist when mortgage rates bounce up a scootch to 4.7%.  It's all a matter of perspective.