Today’s generation can try their hardest to look for extra income, or be financially disciplined so they can reach their goals for the future, yet it still seems as if it they can’t ever get close enough to saving enough money for a down payment to buy a house. Then they think how on earth did their parents manage to somehow buy their first home with little trouble. There are actually very valid reasons why the baby boomer generation were able to buy a home easier than todays generation.
Houses Cost More
Houses are literally just way more expensive than they used to be, even when you adjust for inflation. Affordability, mortgage defaults, ad mortgage repayments have tripled since 1980! Back then average home prices, after being adjusted for inflation, were $157,000, whereas today’s average home prices are around $180,000. Affordability is one of the biggest problems.
There Are No New “Levittowns”
One of the main reasons for higher cost of homes is because there hasn’t been as much development of affordable and middle class housing since. After World War II there was a lot of development of simple and affordable homes designed for veterans and their families. Development of simple homes aren’t as plentiful anymore.
Student Loan Debt
The Baby Boomer Generation did not come out of college with tens of thousands of dollars in debt from student loans. College costs have been rising like crazy and above the rate of inflation, therefore kids of the Class of 2015 have an average of $35,000 to pay back. This is money you would use to save up for a downpayment on a home but instead are paying back your loan over 10 years.
Young People Can’t Find Good Jobs
More than 12% of people from age 16-24 are unemployed. This explains the reason why this generation can’t start saving up for a downpayment. Especially with student loan debt, it’s almost impossible to start saving, which puts them behind in the financial game significantly.
You Have To Save For Retirement
The Baby Boomers did not have to put money away in a 401K or individual retirement account (IRA). That is because they were offered a pension or a defined benefit retirement plan. Participation in pensions by workers fell from 38% to 20% between 1980 and 2008. Saving for retirement takes away from the money that you want to save for a down payment on a home.
Incomes Haven’t Been Growing
In recent years, the economy has been showing signs that people are not getting paid more as the years go by. Our economy should be producing wage growth of at least 3.5% to 4% but that is not the case. Instead it has stayed steady at 2.3% for about a decade. The Baby Boomers were accustomed to an increasing wage.