8 ms·

I would love to know the proportion of people at, say, 25 that can afford to buy a house (in the area they grew up and of some reasonable size e.g. 3 bedroom) o

I would love to know the proportion of people at, say, 25 that can afford to buy a house (in the area they grew up and of some reasonable size e.g. 3 bedroom) over time. Sure, income has gone up, but so have house prices and so that proportion has surely collapsed. That has a much bigger effect on young peoples' lives than the number of luxury items they can buy and stuff into the property that they don't have. Edit: I found this interesting graph for the UK (where I live) [1]. It shows the ratio of average house price to average annual income. Not perfect measure as distribution of income over age brackets is probably more imbalanced now due to starting work later (18 - 25 rather than 16 - 21) but still interesting. Brief textual summary: * 1920 - 1945: 5 ish * 1945 - 1955: 6 - 7 (brief spike) * 1960 - 2000: 4 - 5 (with occasional spike to 6) * 2000 - 2020: 8 - 9 (with dip in the middle but still above 7) [1] https://www.schroders.com/en/insights/economics/what-174-years-of-data-tell-us-about-house-price-affordability-in-the-uk/ https://www.schroders.com/en/insights/economics/what-174-yea... Edit 2: Here in the UK the problem is particularly acute in the suburbs of the big cities, especially London, because the ability to build new housing is artificially restricted by the green belt legislation [2]. [2] https://en.wikipedia.org/wiki/Green_belt_(United_Kingdom) https://en.wikipedia.org/wiki/Green_belt_(United_Kingdom)

jka 6y ago
Would 'median disposable income' be a good proxy for that? (in other words, a metric to determine whether this increased median income ends up in the pockets of and usable by the recipients, or whether it is being used to support day-to-day life)
- quietbritishjim 6y ago
  If by "that" you mean the ability to buy a decent house for yourself then the answer is that it would be an extremely poor proxy ... almost uncorrelated. It's possible to live without buying a house or even renting by yourself (you can live with parents or rent a shared house with other young people). People in that situation would still have (and be recorded as having) a disposable income even though accomodation is an essential expense because owning your own personal house is not technically an essential expense. Therefore, if wages are decent but housing is extremely expensive (which I believe is the case here in the UK, especially city suburbs) then median disposable income would continue to increase while the ability of young people to buy their own homes would continue to decrease.
  - throwaway0a5e 6y ago
    >if by "that" you mean the ability to buy a decent house for yourself then the answer is that it would be an extremely poor proxy ... almost uncorrelated. Um, what? If you want to buy a house "disposable income" directly translates into ability to save up for down-payment.
    - quietbritishjim 6y ago
      The ability of more people to get housing earlier in their lives is only correlated with the growth in housing stock. If the housing stock is growing more slowly than the population then it's irrelevant if people manage to save more money towards it; that just increases the house prices for everyone. Conversely, if the housing stock is growing faster than the population growth then even a decreasing amount of disposable income wouldn't stop people moving into the vacant properties... the prices would all come down to match. Of course this sounds ridiculous because in a normal market the supply of a good or service would increase if prices go up (positive price elasticity of supply, as the economists would say). But housing markets are often not like that, and they're certainly not like that in the UK suburbs (as I said, that's partly because of the green belt).
  - kortilla 6y ago
    The income has been adjusted for inflation and inflation includes housing. I think the difference between now and 50 years ago is that everyone wants to live in a few select dense cities where back then most of the middle class didn’t want to live in cities (especially true in the US).
    - quietbritishjim 6y ago
      (Edit: I'm not an economist by training and I've realised Im not really sure about any of this, so maybe ignore everything after this paragraph. But certainly, here in the UK, house prices have more than doubled in the last 30 years after adjusting their prices for inflation, so inflation is nowhere near the whole picture.) It is included but at a very different proportion from its actual impact on consumers. For example, the UK standard inflation index, CPI, includes the following items in its measure (as of 2017 [1]): 04.1 Actual rentals for housing: 5.6% 04.2 Owner occupiers' housing costs: 17.4% (Also, I'm not sure whether "Owner occupiers' housing costs" only includes mortgage repayments, but that's the closest thing I could see on the list. And the way it's phrased in that list, with the word "actual rentals", makes it sound like price increases won't necessarily be reflected in the index so long as everyone were to downsize correspondingly - but I'm not clear about that one.) It's like that because inflation is meant to reflect a very different concept than we're talking about here. We're talking about something becoming intrinsically more valuable (in this case, because of scarcity). Inflation is meant to judge when a currency has less intrisic value. So if a house price goes up by 100% but that's because it's twice as valuable, then in some sense the inflation there is 0%. [1] https://www.ons.gov.uk/economy/inflationandpriceindices/articles/consumerpriceindicesabriefguide/2017#whats-in-the-basket https://www.ons.gov.uk/economy/inflationandpriceindices/arti...
bhupy 6y ago
I actually think we shouldn’t be surprised that the proportion of 25-year-olds that can afford to buy a house in the area they grew up in of some reasonable size is about the same as it was for boomers. But the emphasis should be on in the area they grew up in, because in the 21st century we’re seeing a clustering of the economy in a few (predominately coastal) metros. A big part of the problem is that it’s difficult for a 25-year-old to afford to buy a house near their job in San Francisco, not that it’s difficult for them to buy a house near the middle-America suburb they likely grew up in. It’s also worth noting that the median 25 year old doesn’t live in San Francisco or New York. If that’s you, you’re probably in the top 2 quintiles in your age group. All that being said, the inflation-adjusted wealth of the median 25 year old millennial is about equal to the wealth of a 25-year-old Baby Boomer -> https://twitter.com/ernietedeschi/status/1308813020425007105 https://twitter.com/ernietedeschi/status/1308813020425007105 EDIT: to address the UK home-price-multiplier data This thread breaks it down in the US -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361 Outside of a few notorious coastal metros, the multiplier hasn’t changed all that much.
- jlokier 6y ago
  > A big part of the problem is that it’s difficult for a 25-year-old to afford to buy a house near their job in San Francisco, not that it’s difficult for them to buy a house near the middle-America suburb they likely grew up in. I think both are problems, because if they remain in the middle-America suburb, salaries are a lot lower. A 25 year old living where they grew up often doesn't earn enough to buy the local house either.
  - bhupy 6y ago
    Salaries are indeed a lot lower, but the multiple of the median salary required to buy a home is a lot higher in the coastal metros. In other words, the salaries are nominally lower, but in real terms they’re actually higher. This thread actually breaks it down by metro -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361 The home-price-to-income ratio has remained mostly unchanged for all metros except for the infamous coastal ones. At this moment, here’s a quick breakdown of the salary necessary to buy the median home, by metro -> https://www.hsh.com/finance/mortgage/salary-home-buying-25-cities.html https://www.hsh.com/finance/mortgage/salary-home-buying-25-c...
dwiel 6y ago
Exactly. Also, proportion of income spent on student loans at 25 years old. My grandpa had a random part time job and put himself through university.
- bhupy 6y ago
  Some data to quantify that phenomenon -> https://twitter.com/jmhorp/status/1213150244160102400 https://twitter.com/jmhorp/status/1213150244160102400 It's a little harder to pay for college on a teenage wage than it may have been 35 years ago, but not that much harder.
  - quacked 6y ago
    Going by that guy's numbers, someone in 1986 had to work 73 hours per week to afford a semester of college. I either don't think those numbers are accurate enough to reflect people who "put themselves through college", or that people back in the '80s didn't actually put themselves through college. Edit: To clarify, he says "net tuition", then throws out a $15,000 number for modern colleges. That's on the low-to-medium end of the per-semester cost of a modern public institution, so I'm assuming he's also listing the per-semester cost for the 1986 tuition.
    - bhupy 6y ago
      The numbers don't necessarily represent how people put themselves through college, on average — it's just an apples-to-apples comparison of what it would take to "put yourself through college" in 1986 vs today.
      - quacked 6y ago
        Right, but I'm saying I don't think his numbers are correct. Either it was also not possible on average to put yourself through college in 1986, similar to how it's not possible on average to put yourself through college today, or his numbers are wrong. In fact, I bet it wasn't actually possible to put yourself through college in 1986. I bet the people who put themselves through college went between 1950 and 1975.
thursday0987 6y ago
another interesting way to look at is to look at the other basic of life: transportation. can the average 25 year old in any given era afford to purchase their own vehicle? It is arguably way more affordable to be able to own your own car now than it ever has been in the past.
- bhupy 6y ago
  This is another interesting data point. In 1997, it took 1,768 hours of work at the median wage to purchase a Dodge Caravan. In 2018, it took just 1,396 hours of work at the current median wage. In 1997, it took 1,565 hours of work at the median wage to purchase a Toyota Camry. In 2018, it took just 1,258 hours of work at the current median wage. Also, not only do you work fewer hours today than 20 years ago, the car you get is of higher quality / safety. https://twitter.com/jmhorp/status/1230516154281553920 https://twitter.com/jmhorp/status/1230516154281553920
  - C1sc0cat 6y ago
    I don't think the average working week has declined in the last 20's years and a lot of salaried workers work unpaid over time now.
    - bhupy 6y ago
      An interesting hypothesis, but even that hasn't been observed to be true: https://fred.stlouisfed.org/series/AVHWPEUSA065NRUG https://fred.stlouisfed.org/series/AVHWPEUSA065NRUG In the '90s, the increase in income was partially attributable to employees putting in more hours every year, whereas in the recent boom working hours per employee were effectively constant. So the in the 2010's, income growth wasn't just bigger, it was of higher quality -> https://twitter.com/Noahpinion/status/1308790402082766849 https://twitter.com/Noahpinion/status/1308790402082766849 Finally, the number of hours of the working week is irrelevant in the context of the "number of hours required to buy X" metric.
- throwaway0a5e 6y ago
  Your stats are basically gonna look the same as the housing map but they're gonna be skewed by four-ish factors. Vehicles are much more liquid than housing. You can't load freight trains full of land and ship them to an auction across the country where used land dealers buy them for resale. Since the 1950s many states have adopted laws (and some states have adopted, repealed and re-adopted) and practices with the effect of increasing the price point of the "minimum viable shitbox". The bottom of the market is just a ton higher in some states than others. It's like how you can't buy a mobile home in Manhatten but with cars. Used car dealers compete with exporters for cars. If Brazil (or wheverver) has an economic boom they remove used cars from the market in places like the US and Canada increasing cost. The qualities of a new car and the life-cycle of a car has changed dramatically since the 1950s whereas houses are fundamentally just land prices plus some (with the "some" being a reflection of developers saying "well if I'm gonna buy this expensive-ass land I might as well put an expensive-ass McMansion on it) Alternative (mostly public) transit options in various places has waxed and waned since the 1950s. So yes, you could use cars for your point of comparison but you'd basically get the same thing as with housing but with the added downside of more variables to control for any time you want to make a cross-time or cross-location comparison with the data.
treis 6y ago
>I would love to know the proportion of people at, say, 25 that can afford to buy a house (in the area they grew up and of some reasonable size e.g. 3 bedroom) over time. Sure, income has gone up, but so have house prices That question is more about how government is for young people than the economy. High Housing costs are mostly caused by local government policy. In places where developers can respond to demand housing isn't any more expensive today than it was in the last 50 years.
- bhupy 6y ago
  Correct, this thread (and the tool linked to it), breaks down what that looks like across localities -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361

jka 6y ago

Would 'median disposable income' be a good proxy for that? (in other words, a metric to determine whether this increased median income ends up in the pockets of and usable by the recipients, or whether it is being used to support day-to-day life)

quietbritishjim 6y ago
If by "that" you mean the ability to buy a decent house for yourself then the answer is that it would be an extremely poor proxy ... almost uncorrelated. It's possible to live without buying a house or even renting by yourself (you can live with parents or rent a shared house with other young people). People in that situation would still have (and be recorded as having) a disposable income even though accomodation is an essential expense because owning your own personal house is not technically an essential expense. Therefore, if wages are decent but housing is extremely expensive (which I believe is the case here in the UK, especially city suburbs) then median disposable income would continue to increase while the ability of young people to buy their own homes would continue to decrease.
- throwaway0a5e 6y ago
  >if by "that" you mean the ability to buy a decent house for yourself then the answer is that it would be an extremely poor proxy ... almost uncorrelated. Um, what? If you want to buy a house "disposable income" directly translates into ability to save up for down-payment.
  - quietbritishjim 6y ago
    The ability of more people to get housing earlier in their lives is only correlated with the growth in housing stock. If the housing stock is growing more slowly than the population then it's irrelevant if people manage to save more money towards it; that just increases the house prices for everyone. Conversely, if the housing stock is growing faster than the population growth then even a decreasing amount of disposable income wouldn't stop people moving into the vacant properties... the prices would all come down to match. Of course this sounds ridiculous because in a normal market the supply of a good or service would increase if prices go up (positive price elasticity of supply, as the economists would say). But housing markets are often not like that, and they're certainly not like that in the UK suburbs (as I said, that's partly because of the green belt).
- kortilla 6y ago
  The income has been adjusted for inflation and inflation includes housing. I think the difference between now and 50 years ago is that everyone wants to live in a few select dense cities where back then most of the middle class didn’t want to live in cities (especially true in the US).
  - quietbritishjim 6y ago
    (Edit: I'm not an economist by training and I've realised Im not really sure about any of this, so maybe ignore everything after this paragraph. But certainly, here in the UK, house prices have more than doubled in the last 30 years after adjusting their prices for inflation, so inflation is nowhere near the whole picture.) It is included but at a very different proportion from its actual impact on consumers. For example, the UK standard inflation index, CPI, includes the following items in its measure (as of 2017 [1]): 04.1 Actual rentals for housing: 5.6% 04.2 Owner occupiers' housing costs: 17.4% (Also, I'm not sure whether "Owner occupiers' housing costs" only includes mortgage repayments, but that's the closest thing I could see on the list. And the way it's phrased in that list, with the word "actual rentals", makes it sound like price increases won't necessarily be reflected in the index so long as everyone were to downsize correspondingly - but I'm not clear about that one.) It's like that because inflation is meant to reflect a very different concept than we're talking about here. We're talking about something becoming intrinsically more valuable (in this case, because of scarcity). Inflation is meant to judge when a currency has less intrisic value. So if a house price goes up by 100% but that's because it's twice as valuable, then in some sense the inflation there is 0%. [1] https://www.ons.gov.uk/economy/inflationandpriceindices/articles/consumerpriceindicesabriefguide/2017#whats-in-the-basket https://www.ons.gov.uk/economy/inflationandpriceindices/arti...

bhupy 6y ago

I actually think we shouldn’t be surprised that the proportion of 25-year-olds that can afford to buy a house in the area they grew up in of some reasonable size is about the same as it was for boomers. But the emphasis should be on in the area they grew up in, because in the 21st century we’re seeing a clustering of the economy in a few (predominately coastal) metros. A big part of the problem is that it’s difficult for a 25-year-old to afford to buy a house near their job in San Francisco, not that it’s difficult for them to buy a house near the middle-America suburb they likely grew up in. It’s also worth noting that the median 25 year old doesn’t live in San Francisco or New York. If that’s you, you’re probably in the top 2 quintiles in your age group. All that being said, the inflation-adjusted wealth of the median 25 year old millennial is about equal to the wealth of a 25-year-old Baby Boomer -> https://twitter.com/ernietedeschi/status/1308813020425007105 https://twitter.com/ernietedeschi/status/1308813020425007105 EDIT: to address the UK home-price-multiplier data This thread breaks it down in the US -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361 Outside of a few notorious coastal metros, the multiplier hasn’t changed all that much.

jlokier 6y ago
> A big part of the problem is that it’s difficult for a 25-year-old to afford to buy a house near their job in San Francisco, not that it’s difficult for them to buy a house near the middle-America suburb they likely grew up in. I think both are problems, because if they remain in the middle-America suburb, salaries are a lot lower. A 25 year old living where they grew up often doesn't earn enough to buy the local house either.
- bhupy 6y ago
  Salaries are indeed a lot lower, but the multiple of the median salary required to buy a home is a lot higher in the coastal metros. In other words, the salaries are nominally lower, but in real terms they’re actually higher. This thread actually breaks it down by metro -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361 The home-price-to-income ratio has remained mostly unchanged for all metros except for the infamous coastal ones. At this moment, here’s a quick breakdown of the salary necessary to buy the median home, by metro -> https://www.hsh.com/finance/mortgage/salary-home-buying-25-cities.html https://www.hsh.com/finance/mortgage/salary-home-buying-25-c...

dwiel 6y ago

Exactly. Also, proportion of income spent on student loans at 25 years old. My grandpa had a random part time job and put himself through university.

bhupy 6y ago
Some data to quantify that phenomenon -> https://twitter.com/jmhorp/status/1213150244160102400 https://twitter.com/jmhorp/status/1213150244160102400 It's a little harder to pay for college on a teenage wage than it may have been 35 years ago, but not that much harder.
- quacked 6y ago
  Going by that guy's numbers, someone in 1986 had to work 73 hours per week to afford a semester of college. I either don't think those numbers are accurate enough to reflect people who "put themselves through college", or that people back in the '80s didn't actually put themselves through college. Edit: To clarify, he says "net tuition", then throws out a $15,000 number for modern colleges. That's on the low-to-medium end of the per-semester cost of a modern public institution, so I'm assuming he's also listing the per-semester cost for the 1986 tuition.
  - bhupy 6y ago
    The numbers don't necessarily represent how people put themselves through college, on average — it's just an apples-to-apples comparison of what it would take to "put yourself through college" in 1986 vs today.
    - quacked 6y ago
      Right, but I'm saying I don't think his numbers are correct. Either it was also not possible on average to put yourself through college in 1986, similar to how it's not possible on average to put yourself through college today, or his numbers are wrong. In fact, I bet it wasn't actually possible to put yourself through college in 1986. I bet the people who put themselves through college went between 1950 and 1975.

thursday0987 6y ago

another interesting way to look at is to look at the other basic of life: transportation. can the average 25 year old in any given era afford to purchase their own vehicle? It is arguably way more affordable to be able to own your own car now than it ever has been in the past.

bhupy 6y ago
This is another interesting data point. In 1997, it took 1,768 hours of work at the median wage to purchase a Dodge Caravan. In 2018, it took just 1,396 hours of work at the current median wage. In 1997, it took 1,565 hours of work at the median wage to purchase a Toyota Camry. In 2018, it took just 1,258 hours of work at the current median wage. Also, not only do you work fewer hours today than 20 years ago, the car you get is of higher quality / safety. https://twitter.com/jmhorp/status/1230516154281553920 https://twitter.com/jmhorp/status/1230516154281553920
- C1sc0cat 6y ago
  I don't think the average working week has declined in the last 20's years and a lot of salaried workers work unpaid over time now.
  - bhupy 6y ago
    An interesting hypothesis, but even that hasn't been observed to be true: https://fred.stlouisfed.org/series/AVHWPEUSA065NRUG https://fred.stlouisfed.org/series/AVHWPEUSA065NRUG In the '90s, the increase in income was partially attributable to employees putting in more hours every year, whereas in the recent boom working hours per employee were effectively constant. So the in the 2010's, income growth wasn't just bigger, it was of higher quality -> https://twitter.com/Noahpinion/status/1308790402082766849 https://twitter.com/Noahpinion/status/1308790402082766849 Finally, the number of hours of the working week is irrelevant in the context of the "number of hours required to buy X" metric.
throwaway0a5e 6y ago
Your stats are basically gonna look the same as the housing map but they're gonna be skewed by four-ish factors. Vehicles are much more liquid than housing. You can't load freight trains full of land and ship them to an auction across the country where used land dealers buy them for resale. Since the 1950s many states have adopted laws (and some states have adopted, repealed and re-adopted) and practices with the effect of increasing the price point of the "minimum viable shitbox". The bottom of the market is just a ton higher in some states than others. It's like how you can't buy a mobile home in Manhatten but with cars. Used car dealers compete with exporters for cars. If Brazil (or wheverver) has an economic boom they remove used cars from the market in places like the US and Canada increasing cost. The qualities of a new car and the life-cycle of a car has changed dramatically since the 1950s whereas houses are fundamentally just land prices plus some (with the "some" being a reflection of developers saying "well if I'm gonna buy this expensive-ass land I might as well put an expensive-ass McMansion on it) Alternative (mostly public) transit options in various places has waxed and waned since the 1950s. So yes, you could use cars for your point of comparison but you'd basically get the same thing as with housing but with the added downside of more variables to control for any time you want to make a cross-time or cross-location comparison with the data.

treis 6y ago

>I would love to know the proportion of people at, say, 25 that can afford to buy a house (in the area they grew up and of some reasonable size e.g. 3 bedroom) over time. Sure, income has gone up, but so have house prices That question is more about how government is for young people than the economy. High Housing costs are mostly caused by local government policy. In places where developers can respond to demand housing isn't any more expensive today than it was in the last 50 years.

bhupy 6y ago
Correct, this thread (and the tool linked to it), breaks down what that looks like across localities -> https://twitter.com/jmhorp/status/1221828310000271361 https://twitter.com/jmhorp/status/1221828310000271361