Last week we talked about first-time buyers who are taking a pause in their house hunting and redirecting their savings. But is this the new permanent reality in a country that includes homeownership as part of the American dream?
According to a new Wall Street Journal/NORC survey, only 36% of voters in the new survey said the American dream still holds. When this same question was asked last year by the Wall Street Journal poll, 68% said yes, almost twice the share of the new poll. In addition, half of voters in the new poll said life in America is worse than it was 50 years ago compared with 30% who said it had gotten better. But the scary outcome of this survey is that among all respondents, 18% said the American dream never held, a very sad statistic.
As reported last week as well, the National Association of Realtor’s October sales statistics fell 14.6% from last year. Manatee County’s sales of single-family homes also fell by 12.8%. This reflects the ongoing low inventory available to buy and higher interest rates. Who could blame young people when they say the American dream doesn’t exist when one of the major components of that dream is the ability to purchase homes?
Even though according to recent data inflation has eased, there is still a disconnect in the way Americans perceive the economy. Since ownership of housing isn’t measured by the Bureau of Labor statistics, the increasing cost of purchasing a home isn’t reflected in the inflation rate, however, not being able to purchase a home matters more than the price of gas or food to home buyers. Since January 2021 home prices have risen 29%, according to the Case-Schiller national home price index. In addition, mortgage rates have nearly tripled.
If you already own a house and have no reason to move, you might not care or be affected by lower sales numbers and higher interest rates. Many long-term homeowners with low mortgage rates are sitting back and enjoying seeing their equity going up, which it has consistently for the most part.
Homeownership is still viewed as achieving the American dream, as remote as it may seem to first-time buyers in this market. So far, this hasn’t lowered homeownership rates, which are higher among almost all age groups than before the pandemic, according to the Census Bureau. That could, however, change if the unaffordability of housing remains high. Mortgage rates have dropped with the easing of inflation, but they are still historically high. The consensus is that home prices will likely not fall in 2024 but level off somewhat. Since so much depends on that assumption it’s almost impossible to know what’s down the road next year.
Since I was a full-grown adult 50 years ago owning my own home, I tend to agree that at least the economic life of people now is worse than 50 years ago. That doesn’t, however, mean that all life is worse. Certainly, medical progress is better, education is more available and better, and women and minorities have more opportunities, not to mention technology, which has made all our lives better.
I believe the housing market will eventually normalize and all the first-time buyers who are booking exotic vacations will start buying again. It’s nice to have wealth, but we shouldn’t measure our happiness by it when so many other things in life are more important.
