What if Housing is Done for a Generation?

From twitter @mark_neely “What if Housing is Done for a Generation?” by Tyler Durden points to some pretty scary economics (I take exception to his federal deficit talk – it isn’t the issue – but in the main my sense is he’s on to something).  A key quote:

“Without going into too much detail, we can stipulate that the Baby Boom (65 million people) will be downsizing their housing, i.e. selling for the next two decades. We can also stipulate that most of the Baby Boom no longer has the wherewithal to buy second homes; rather, they will be dumping second homes to pay for living expenses as earnings, interest income and housing equity have all cratered since 2007.

Not only are there not enough younger workers to buy all these millions of homes that will be put on the market, few of those younger workers have either the creditworthiness or income to buy a house unless the Federal government gives them essentially free money and a no-down payment entry.


Labor’s share of the national income has plummeted to historic lows. How can households be expected to buy a house when their real (inflation-adjusted) income declines year after year?”

Further, as Durden points out, “Part-time jobs and temp jobs do not generate enough stable income to support a mortgage.”

Along those lines it’s worth taking a look at income and housing.  The National Low Income Housing Coalition’s “Out of Reach 2012” report (h/t @Oryx2046) shows how unaffordable rental housing is – showing for example that in no state can a minimum wage worker afford a fair market value two-bedroom unit at 40 hours a week (assuming the standard no more than 30% of income going to housing).  In Wisconsin, a relatively mid-level affordable state, it takes an average of 79 work hours a week to afford the rent – while in three of the most expensive states (NY, NJ and CA) it takes 130 hours or more.

But who is living on minimum wage in the U.S.? Actually, more people than you might think – the U.S. is a leader among nations in “low wage jobs” (less than two-thirds of the median hourly wage) all of which are close to minimum wage – within about $3 at the high end in constant dollars – and many of which are actually minimum wage.  About one in four American workers make “low wages” – wages that clearly cannot support a mortgage at current pricing.  Many of them include younger Americans – the type of people who in a prior economy had wage income that permitted buying homes.