Why everything feels wrong in the US

This post is a follow-up to a previous newsletter, There is no more middle class (and why it’s only going to get worse).

I was browsing Reddit and came across this post. And here’s the top comment:

This is a pretty common type of post on Reddit, X, Facebook groups and in real life conversations. It’s something a lot of households have felt, largely since the pandemic, when house prices really rose.

Home ownership is the cornerstone of the American Dream. To be able to own your own home, own your own land, and raise your family there, in the freest country in the history of the world.

When that prospect becomes too unrealistic for the majority of career paths for Americans, people start to feel dread.

Now as always, this is just one random dude’s thoughts on the internet. But, if I could pinpoint one thing that I think has caused this angst in the US, I would point at housing affordability.

As you can see, housing prices have been up only, but especially since pre-covid.

Most people want to live a comfortable life. They want to work at a job they like. They want to live in a safe area. They want to have roots in that safe area through family and friends.

They shouldn’t need to work at a hedge fund, or own a business, or work multiple jobs just to get these things.

I mean, just look at that comment, “We did everything right - college, grad school, work. Now it feels impossible to start a family and grow that family in a home of our own. It’s incredibly discouraging. No wonder many aren’t having kids.”

This person would have thrived back in the 80s and 90s. When an investment in a college degree meant a career. When working hard led to pay increases that kept up with inflation.

Now that archetype is looking at $200k in student loans, a job that pays $85k and caps out at $100k in middle management, and can’t afford the average home sale price of $600k in the area they grew up in.

It’s pretty messed up if you ask me.

Now, we have a policy in our house: if you are bringing a problem, bring a potential solution with it.

I think I need to break that policy for this email because I don’t really see an easy way out. I am convinced that if people could afford their homes and not have it be a financial burden, this would alleviate a large amount of this angst.

It all starts at home. No one wants to permanently raise their family in an apartment they don’t own.

But in order to bring housing prices down, you need two things:

1. Build more houses. It really is simple supply and demand.
2. Get people to be okay with building more houses.

The second one is the hardest because it means people have to give up a large percentage of their wealth.

About 47% of a typical baby boomer homeowner household’s net worth is in their primary home’s equity.¹

Baby boomers have little to no prospects for future income and must rely on their savings to live out their lives.

If you cut housing prices through more building, you are sacrificing one generation for the affordability of the next.

I’m not advocating for a right decision here. These are simply the tradeoffs and it’s important to understand why it’s such a difficult problem.

Finding a solution does feel hopeless on a grand scale. And similarly for a lot of households.

I would encourage you to read about how wages for the majority of Americans are not keeping up with inflation in a previous newsletter, There is no more middle class (and why it’s only going to get worse). The key takeaway is this: If your wages are not rising with your cost of living, you are getting poorer and poorer every year.

Please feel free to reach out if you want to talk about your scenario. I am not a financial advisor and none of this should be viewed as financial advice, but I don’t mind sharing my thoughts if you have any questions.

Alex Kim
CEO of NookLocal

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