Boomer versus Millennial Wrestling World Smackdown, Portland is out ahead, but Seattle is running a close second!
Millennial Home Ownership: Disappointment Ahead in Some Places? | Newgeography.com
This is listed as a Millennial issue, but the problem has been created by Boomers who want to keep their property values high by retaining destructive urban growth and/or services boundaries, and highly limiting zoning, and construction/development policies.
"Millennial renters overwhelmingly plan on buying their own homes, though affording them could be far more challenging than they think."
More after the fold!
The Boomers, in inimical Boomer fashion, climbed into the tree fort, and smugly pulled up the rope ladder behind them.
"Apartmentlist.com matched results from its own survey of prospective renters that visit its site with housing market data from more than 90 metropolitan areas around the country, The most revealing finding: Millennials intend to purchase their own homes, but that housing affordability is the greatest barrier. According to apartmentlist.com, the problem is the greatest on the West Coast, New York and Miami (See Figure “% of Millennial Renters that Can’t Afford to Buy”, from apartmentlist.com):
In nearly all the metros we looked at, affordability was the #1 reason for delaying homeownership, but millennials on the west coast struggled the most: Portland, San Diego, Seattle, Los Angeles, and San Francisco all had more than 80% of renters listing affordability as a concern. Miami and New York, expensive metros with many cost-burdened renters, were #6 and #7 on the list.
Perhaps surprisingly, two metropolitan areas that have been among the greatest beneficiaries of the housing affordability driven net domestic migration from coastal California, Portland and Seattle, scored the worst on affordability as a barrier to purchasing homes (90 percent and 89 percent respectively). These areas were once much less expensive in the past, but are rapidly catching up with California in terms of unaffordability."
Brilliant. Portland is the worst in the nation for Millennial housing affordability. Has Portland reached peak Millennial? Probably not, but it likely will begin to see out migration of the older cohort of millennials who want families, but will never be able to afford a home in Portland on their salaries. For they younger cohort of Millennials, Portland is still THE place to go to retire.
While 64% of Americans today own their own homes, among Millennials, a much higher percent anticipate owning a home. In Portland that number is 81%. This is a laudable goal, and shows that the differences between Millennials and prior generations is relatively small. But while that 81% anticipation to own a home rate is laudable, it is likely unattainable for most Millennials in the Portland area, or the Seattle, San Francisco, LA, San Diego, New York, etc, etc, etc. Notice how these places are all Blue Model cities, progressive bastions of equality!
But anticipation is not owning, and Millennials face a massive hurdle before they will ever be able to execute on their desires to own a home, saving money for the down payment.
"Apartmentlist.com develops an estimate for each metropolitan area, using monthly savings rates, existing savings and the potential for financial assistance (for example from relatives) in obtaining enough for the down payment. In the most costly market, San Francisco, the average Millennial will need more than 28 years to build up enough funding for a down payment in San Francisco. This means that older Millennials would be old enough (62) to qualify for early retirement benefits from Social Security by the time they have enough to pay the down payment on a starter home. Sacramento is nearly as challenging, where it would take another 27 years to accumulate a down payment. Things are not that much better in Los Angeles (20 years), San Diego (19 years) and Denver (18 years)."
Dismal! The Boomers have structured our land use laws so Millennials in many major urban areas will need to save money for decades to afford a starter home! This is not how it was even a few decades ago. Remember the 28 years depends upon the Millennials not having families or buying expensive cars, but continuing the savings rates they have today.
"But the most important bottom line conclusion of the research is what apartmentlist.com calls the “affordability gap.” This is the difference between the actual time required to accumulate a down payment and the time expected by survey respondents. The biggest affordability gap is in San Francisco, where respondents expected down payment requirements that would take only 11 years more to save. The reality, according to the study, is 28 years, more than 2.5 times that figure. In Sacramento, respondents expected that it would take 16 years, still far short of the more realistic 27 years. In Los Angeles, San Diego and Denver, it is likely to take from eight to ten years more to save enough for a down payment than survey respondents estimate."
No one expects these kinds of numbers. And as we have seen, the San Francisco bay area has 4.5 million sq. acres of available land, of which 800,000 sq. acres is developed, and all but about 300,000-500,000 remain available for development (and activists appear to be shutting down all further development). This means that only 18% of the total available bay area land is developed, and the Boomer (primarily) wish to shut down any further development. Amazing!
Talk about missing the 900 lb gorilla in the room . . .
San Franciscans were not the first to realize the city was a mistake . . .
There are alternatives available to Millennials, however.
"In contrast, in a number of other metropolitan areas, such as Houston, Dallas-Fort Worth, Atlanta, Philadelphia and Kansas City, Millennials have over-estimated the size of down payments necessary to enter the housing market.
For some time, domestic migration trends in the United States has been principally about moving from more expensive metropolitan areas to less expensive metropolitan areas. The apartmentlist.com data suggests that this trend could continue. To achieve their dreams of home ownership and to avoid a life of renting, many Millennials may move to places where housing is priced more for livability."
Expect the migration from the Northeast, and the West to the sunbelt states to continue. Older Millennials soon will want to have families, and clearly want to own their own homes. They west and northeast no longer offer them this option, nor do they offer positive middle class job prospects. Accordingly, as Americans have done for decades, they will move to more hospitable locations.
Portland was not always the worst in nation for housing affordability for young married couples.
Maddogswif and I are end of generation Boomers, yes it is a badge of dishonor, but it is true. After we married in 1989, we had about $25,000 in joint student loans, I was still in Law School, she had graduated from her Doctor of Pharmacy program, and immediately went to work. The Portland area was in its first housing price boom in quite a while. During our first six months of marriage we were able to save $10,000, borrow an additional $10,000 from my parents (with interest), and buy a home costing $95,000. It was a very nice, cosy home. Today Zillow says, it is worth:
XXXX SW Seymour Ct,
4 beds 2 baths 1,912 soft
Price this home
Rent Zestimate®: $2,450/mo
Lot: 7,100 sqft,
Built in 1967
All time views: 236
Heating: Forced air
Last sold: Jun 2008 for $395,000
Parking: Garage - Attached, 484 sqft garage
This was actually a step above a starter home, more appropriately a second step home, or an empty nester home. I would consider starter homes to be less than 1,600 sq. ft. with one or two bathrooms. Second step homes 1,600+ to 2,200 sq. ft. two to three bath.
Back in 1989, a single working professional, with a spouse still in law school could buy this home and still repay the parental loan of $10,000 within 6 or 8 months or so. I know this for a fact, because we did it. Understand, we did not go with a conforming 80/20 loan but went with an FHA loan with an escrow account for property tax, and insurance, but it took us less than one year for the home to increase in value sufficiently so the value exceeded the necessary 20% loan to equity ratio, so we refinanced to a significantly lower rate (from about 11% to about 8.5%), and eliminated the escrow account.
Millennials in Portland, even those employed in the same profession as my wife cannot buy the home we purchased as a starter home until they save for many years. The average Millennial two worker young family will need to save for a decade or more.
Keynesian economist, and progressives love to point out that there has been a great wage stagnation over the past 30 or so years. This is partially true, but essentially false. Wages did rise during this time but most of the rise was in benefits not paycheck wages. This happened because after Reagan and Volcker broke the back of the 1970s stagflation dragon, prices began a slight deflation when compared to wages. This meant that wages were "rising" but only when compared to prices. The reality was wages were only increasing at a tiny fraction above inflation, while prices were rising less than the rate of inflation.
This did not happen in housing pricing, medical services pricing, government costs, public school costs, and a few other areas, notice these are all areas regulated by the Blue Model mafia. Housing prices were manipulated by the Boomers through zoning rules, and various land use rules to limit supply. This drove up prices, and was sold to the gullible renting masses as the only way to protect against the local are becoming a new LA, or other detested area with terrible traffic.
Unsurprisingly, the results were not as anticipated. In Portland, for example, traffic is terrible, and every time friends or family come from California, whether it be the San Francisco area, LA area, or other, they all comment on how Portland's traffic is as bad as anything they have seen.
As you can see from the Zillow page, home prices in Portland are silly stupid.
Incredibly, Portland followed the Smart Growth plan to avoid becoming LA, and became LA. Why? Because the plan was essentially exactly the same plan LA followed, albeit LA followed the plan naturally.
LA was formed during the advent of the 20th century, a fully modern city, but formed while the nation was still poor, the West still wild, the cowboy era ending, and the American automobile little more than a glint in the eyes of a few midwestern entrepreneurs. At first, LA was a town of horses, and later horse drawn trolly cars, and finally electric street cars, and, of course, coal fired trains. Cities dependent up on trolleys, and streetcars grew in a very particular manner. The people who worked in the city did not have personal transportation, and so needed to live close enough to walk everywhere they needed to go. It is this dynamic which created the very confined compact cities like New York, Boston, and nearly all European cities.
LA, however, had nascent, public transportation, trolleys, and streetcars. This allowed the people to have a bit of land, and not be confined to multistory mass housing, but instead to a combination of low intensity apartments and detached, single family housing. The land available for development was, however, limited, by the trolley/street car access. So, most people needed to live within perhaps a half mile of the streetcar line. What happened is LA grew into a massive expanse of compact suburbs with single family homes on very small 7,000 sq. ft. or so, lots. As the land with streetcar line access filled up, the lines were lengthened. This continued during the early days of the automobile mostly due to cost of automobile use and the lack of automobile ownership penetration.
Portland did not grow like this. While Portland did have streetcar lines, the city was growing primarily at the end of, and after the street car era. This makes Portland mostly an automobility city. The urban, and transportation planners today have decided that the Euro model, essentially the LA model, is the model all American cities should be based upon. This is termed progress, as if progress is attained by looking back into the past, finding an old moribund model, and adopting it as new!
Portland, actually Oregon in total, has adopted an urban growth boundary which limits growth/development to specific areas surrounding cities, and towns. Apparently there was a paranoia during the 1960s that Oregon would run out of land. As we have seen the SF bay area is about 18% developed (actually less), but in Oregon the area developed is tiny, about 3.5 % of the total land area of the state. If we count all roads, that jumps to something less than 5%. Yet, Oregonians are terrified of development. This is due in part to the fact that the urban, and transportation planners have terrified the populace into believing that Portland will look like LA if it did not impose an urban growth barrier, and build a bus and light rail public transportation network, and then fill infill with multistory mass housing, and small detached single family housing on tiny 7,000 sq. ft. lots.
Sound familiar? Yes, it is LA just in reverse. What LA created organically, Portland's urban, and transportation planners would create after the fact, and accidentally, while attempting to thwart exactly what they were creating. Ultimately, this represents all progressivism, an attempt to attain a goal, but in doing so implementing policies which actually, and obviously will attain the opposite. Insanity!
Portland has now achieved the difficult Triple Lindy, by strictly limiting development, drastically reducing the supply of land available for development, and is now on a binge build of light rail, streetcars, tram, commuter rail, and any other 19th century transportation nodes it can think of. We don't have a funicular, but I am sure somewhere in the antiquated minds of the Portland transportation planners there is a plan.
The problem with LA today is too much development, in too small an area, with too few freeway, and arterial roadways. Lot's of people in small areas are fine, provided they have access to transportation they desire, and need. Portland would never follow this last nail in the coffin ensuring Portland becomes LA North, right? Wrong. Portland uses the highway funds to fund light rail, underbidding freeways, and arterial roadways, ensuring Portland becomes LA North. It is insanity like clockwork.
Unless Portlandians/Oregonians have a come to Jesus and realize the urban growth boundary, zoning, urban, and transportation planning are destroying the livability of the city/state, this will continue, until finally, the Millennials, fed up, will emigrate to the sunbelt looking for greener pastures. Land prices will collapse, and the Willamette Valley will become little more than an old age home full of people looking for a home buyer to purchase their homes for the $1,000,000 they believe they are worth. Seeing at there are none, the old will be reluctant to leave, hoping for the rebound in pricing, but ultimately dying still holding onto their now unsaleable homes. The end of this crazy train line is Detroit.
Millennials will need to evaluate the best place for them to live and raise families. Unless the Boomers wake up and realize the destruction they are causing, and change the land use laws that so favor them, they will ultimately reap the whirlwind when the Millennials leave in droves, just as Detroit reaped the same benefits a generation ago.
History is not that difficult to understand, nor is economics, but in reality, it is impossible to understand.
Does anyone want to buy a really nice home?