Millennials face a double whammy right now. It's not only the job market that's rotten right now for the young, but the housing market as well.
Usually in bad or uncertain economic times, there are more homes and apartments on the market and rents and prices and rents are at least kept in check.
Sure, the Federal Reserve's multitrillion-dollar monetary manipulations have helped pump up housing values.
But the job market has been slower to respond, leaving millennials too often unemployed or underemployed and unable to afford a place of their own.
Here's a note I received from "Amy," a PhD student in Cambridge and likely one of our society's future researchers and scientists - if only she can find a place to live.
She's tired of the generation bashing and the snide remarks by boomers about millennials lacking motivation. (See recent post on the issue.)
"As a Millennial, my homeownership future looks bleak," Amy writes. "But my work ethic has nothing to do with it. The same can be said of thousands of other young people in my position in Boston and beyond."
Here's Amy's note:
I've fortunately not faced the job market yet-- I'm working on my PhD. (PhDs in STEM fields are essentially like entry level jobs. You're training on a government grant, and in turn, your tuition is covered and you receive a living stipend.) At least with the job market, there's always hope of a position opening up when I graduate.
Housing is a much bigger concern. With the money I spend on rent in Cambridge, it's unclear when, if ever, I'd ever be able to save enough for a down payment. Moving out to the suburbs just shifts the issue-- cheaper rent, but new expenses like car payments, insurance, parking, and gas, and/or a pricey commuter rail pass. No matter how I look at it, I spend nearly half of my after-tax income on housing.
Housing expenses also add up quickly when you're forced to move every year or two. With no limit on the rate of rent increases for a Cambridge or Boston apartment, it's not uncommon to hear stories of rent spiking five to ten percent in one year. (That happened to me last year.) Then, your options are to spend thousands of dollars to move (full month broker fee plus moving truck rental) and forget any savings you have been trying to accumulate, or somehow come up with the extra rent money each month-- again, forget any money you have been putting away.
This is all assuming you can even find a new place. In addition to the standard pay stub and credit check, our move last year required resumes, a letter of recommendation from our previous landlord, personal biographies, and interviews to find the "best fit." (To be clear, this was all for a one-bedroom, no roommates were involved.) There were bidding wars with other tenants, as well.
Significant student loans add to the problem. As late as 1980, a year's tuition at Harvard cost less than $15,000 (in constant 2013 dollars). Today, that figure is over $38,000. My fiancÚ and I pay over $2,000 per month in student loan payments. Deductions for student loan interest are capped at $2,500 per year and are entirely phased out for anyone making over $75,000 per year. We can't deduct a dime of our rent payments. Yet home-owning Boomers save thousands of dollars every year through the mortgage interest deduction.
So that's the long answer to your short question. As a Millennial, my homeownership future looks bleak. But my work ethic has nothing to do with it. The same can be said of thousands of other young people in my position in Boston and beyond.
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