The “housing affordability crisis” is more a crisis of wasteful spending

According to Yahoo! News, the housing affordability crisis is spreading.

What began on the coasts, in areas like New York and San Francisco, is now radiating into the nation’s heartland, as well as to cities from Las Vegas to Charleston, South Carolina. Entry-level buyers are scrambling to purchase homes that are in short supply, sending values soaring.

Expectations that the Federal Reserve will reduce interest rates this week will do little to change the sober reality: For many, prices have risen much faster than incomes, pushing homeownership out of reach for a new generation of hopeful buyers. That’s cooling the market, with the 2019 spring season shaping up as the slowest for sales in five years, according to CoreLogic Inc.

“All signs point to a housing market that should be doing really well and it’s not,” said Danielle Hale, chief economist for “The No. 1 constraint, despite low mortgage rates, is that people can’t find housing that they feel is affordable.”

Many buyers in expensive West Coast cities have already retreated after a surge in prices squeezed them out. But in other areas, demand is still robust, fueled by a strong economy and this year’s rapid decline in borrowing costs. There’s just too little to buy, and too much competition.

There’s more at the link.

There are undoubtedly systemic issues – the buying up of lower-cost housing stock by major investors;  the lack of new-build affordable housing, due to builders concentrating on the mid- to upper levels of the market;  the ongoing squeeze on salaries and wages, stemming from the 2007-08 financial crisis;  and so on.  However, I strongly suspect that one of the biggest reasons for the problem is that people simply waste an enormous amount of money on frills, fripperies and unnecessary luxuries.

Let me use my parents, and then my wife and myself, as examples.  In 1960 my parents bought a 70-year-old house, two-story, with 17 rooms.  The only reason they could afford it (at a price of 6,000 UK pounds in those days) was that it was in very poor condition internally, and therefore sold for well under half what it would have fetched in good condition.  Over the next decade, my father renovated and restored the place.  He invested the equivalent of another 6,000 pounds, plus hour upon hour of his time in “sweat equity“.  (I can remember “helping” with the wallpaper . . . although I suspect my parents re-did the bits I helped with, after I’d fallen asleep!)  They paid for it all by cutting back in other areas.  We kids had to play in the garden rather than go out for entertainment, and do without the plethora of toys that others had;  but I don’t think we suffered from it at all.  When my parents sold the house in the late 1970’s, it fetched about seven times more than they’d paid for it.

When Miss D. and I married, we brought some large medical bills and other debts into the marriage with us.  We were determined to pay them off as fast as possible, and position ourselves to buy a home.  We did so by simple, yet effective measures like not having any pay TV service at all;  buying clothes from thrift stores, or on sale at Walmart;  buying older used cars for cash, and keeping them running as long as possible, rather than paying interest on a car note;  and eating simply, by shopping at Aldi and other low-priced food stores.  We were still able to enjoy the occasional meal out, and now and again we’d raid delis and foreign food stores to buy a few luxuries, so we didn’t deprive ourselves unduly.  By the end of six years, we’d paid off every penny we owed between us, and accumulated enough savings to put down a 20% deposit on our home in Texas, take out a 15-year housing note for the balance, and pay the moving costs to get here.  (Buying a house in an area where it was affordable also helped a lot!)

When I look at the spending patterns of the average family today, I shake my head in disbelief.  Some spend over $100 a month on TV and movie subscription services;  $100 or more (sometimes a lot more) a week on take-out food or dining out;  kids’ activities like sport, gym, dance, etc.;  annual vacations that can easily cost a family $500 per day or more;  and so on.  When you add up the total amount of those expenditures, it can be well over $1,000 per month without even trying . . . but that’s money spent on transient goods, with no lasting value.  I won’t say it’s always wasted, but much of it is certainly not essential.  (For example, “the average 10-year-old owns 238 toys but plays with just 12 daily“.  See other statistics about the average family’s possessions at that link, too.  They’re mind-boggling!)

I think, if most families cut back on those expenditures and did more as a family to entertain themselves, they’d save a bundle.  Yes, that would probably mean that one family member would have to work part-time (or, in a big family, not at all) to keep an eye on everyone;  but our ancestors did so without thinking twice.  Some will object that families can’t live on a single income today, and that’s probably valid – if they want to maintain a two-income standard of living.  I know some families where they’ve made a conscious decision to cut their coat according to their cloth, and live much more cheaply and simply.  They seem perfectly happy to me – and they avoid the trap of drowning in “stuff”.

If a lot of families, particularly couples with no or few children, would try that for a couple of years, they could pay off a lot of their debt and/or accumulate enough to put down as a deposit on a home.  Right now, they’re trying to roll over credit card debt, buy all sorts of things they don’t really need, and wondering how to afford a house on top of all that.  The simple answer is, they probably can’t!

I highly recommend Dave Ramsay’s financial courses.  They teach a lot of the basics that many people today just don’t seem to get from their parents or school.  Applying those lessons can make a huge difference.



  1. One issue not mentioned in the article is that many areas do not want "affordable" housing because of the nature of the people such attracts. Needless to say, this would not be an issue in, say, East Asian cities like Tokyo. It is the effort to avoid such people that drives the creation of what some have taken to calling "vasectomy" zoning.

    BTW, this is the same reason why public transit works perfectly fine in cities like Tokyo but is not suited for many U.S. cities.

    It seems as certain social problems are unique to specific countries and regions of the world. Fancy that.

  2. Well said, Peter! As so often, I wish I could take your words of wisdom and inject them directly into the minds of my feckless offspring. It drives me crazy when the one with children hires a petting zoo for the five-year-old's birthday and them complains that they can't afford to buy their own house! Clearly I failed to warp their tiny brains properly when I had the chance.

  3. You nailed it Mr. Grant!

    But, there is an equally daunting plague infecting the housing industry. That is the ever expanding: zoning laws; construction/inspection minimum requirements; and increasing fees for each step imposed by the jurisdictions having sway over the dirt one owns. Permitting time periods increase, fees increase, and well, one gets the gist of this. All results in a starter home having an outlandish price tag.

    Some of this is just government greed — more fees. Some of it is to prevent the construction of starter homes to begin with, admittedly a form of discrimination, if you will.

  4. There's also the not-so-minor problem that 'affordable' doesn't mean what it used to. We bought my wife's parents' house from them because they were moving to what was then a fairly small village. They let us have it for half the market price as a wedding gift. That was back in 1962 and it had no central heating, just a coal fire that also provided hot water, no double glazing, and of course no TV and no internet. When we moved ten years later we sold for six times what we should have paid them, and spend that on a newer place in a terrace. It did have central heating and a TV aerial, but no carpets and still no double glazing. Over the years since then we remodelled the kitchen and bathroom, added double glazing, and had a host of extra electric points fitted and telephones in every room. So it's now valued at £300K – but is classed as 'affordable'. If it was still as we bought it, it would be classed as 'unfit for habitation' because so much is now expected to come as standard. The old starter homes now come with all the things we started without but people seem unable to understand that they are luxuries, not essentials, and can be added as and when funds permit.

  5. Not to mention that no one wants to actually start with a 'starter home', they all 'need' a McMansion. Now if we can just let supply and demand alone long enough, it will even out, but I feel sure we'll have another low cost mortgage crisis in 10 or so years because of this because home owhership is a human right ya know, so vote for meeeeee……

  6. The average "middle-class" modest home in my town goes for $700K. And these are bungalows built in the 1940s and 1950s. Anything newer goes up from there, to nosebleed prices.
    Thirty years into my working life, I'm finally earning a six-figure salary. Which gets me an apartment rental rate that should be a mortgage payment.
    If I lived to be 120, I couldn't afford a home here.
    and I knew that 20 years ago.

    Yes, I can go where homes are a fraction of prices locally.
    Surprise, surprise, so would be my salary there.

    My parents bought their home in 1947, for $20K, on the GI Bill. On two incomes, before that was fashionable, let alone required.
    When they sold it 30 years later, fully paid off, for $100K, prices for roughly equivalent houses were at $125K. They had to take on a new mortgage, with a scant few years to retirement, to pay it off before their incomes reduced to half.

    By no strange coincidence, my income in paper dollars, never mind real ones, is not twenty-five to forty times what my parents earned then, but average home prices are. Google "jobs paying $500-750K/yr" and get back to me. If I had one of those, I could afford an average house hereabouts.

    "Affordable" housing in the same state would require me to take on a 4+ hour drive daily, which pounds a car into the ground before that note is paid off, while costing me more non-recoverable money for gas, insurance, repairs, etc. And I'd be living in a transplanted ghetto, in 7 or 8 chances out of 10.
    Because I don't have Uncle Sugar getting me housing on a Section 8 welfare program, or putting me into a house for 1% down.

    If I were still married, with a spouse also making six figures now, we'd be paying property taxes on a $400-500K house (if we could have purchased it before 1990 or so), which, on paper, would be worth twice that.
    With broken backs to show for that paid off mortgage note.

    And that's without adding in the cost of kids from 0-18, at $200K@ all in back then, and approaching a quarter-Mil now, per child, not counting college.

  7. (cont.)
    The only way to ever get ahead would be to sell everything at retirement, and move to Mexico, the Philippines, etc., and hope we could outlive our money without getting sick, or tossed out in some rumblings amongst the diversity.

    Yeah, no.
    (How's that plan working out for farmers in SAfrica, Peter?)

    Other contemporaries moved to GA, TX, etc., and knew when they left here they could never come home, because they could never afford to do so.

    While I could save the 10% tax penalty for living here, with my income doing a 25% drop, or worse, I wouldn't even come close to breaking even, ever.
    Cars cost the same, health insurance costs the same, and short of growing it myself, food doesn't drop that much even across the street from the farm that grows it. But I could save a buck/gallon on gasoline, so getting someplace 40-60 miles from work would get cheaper, except for driving in the snow, floods, etc. six months a year.

    Yeah, I'll pass on that too.

    Communities, not just here but everywhere, develop NIMBY restrictions and other schemes because they can (BFYTW!), and the size of government everywhere metastasizes, while the percentage of people who own a home (or even can) dwindles, even with mortgage rates at or near 0%.

    This is not a coincidence, it's by design.

    Property and home ownership makes you a citizen, with means and assets, options, choices, and the ability to pass money to your heirs and assigns, to grow their own standard of living as well.

    Permanent renter status relegates you to setting 1/4 to 1/2 of your annual income on fire, forever, with zero return, and once you reach retirement age, it puts you squarely under government's thumb for housing, food, healthcare, etc.

    BigGov sees that as a feature, not a bug.

    The more we subsidize useless eaters, and tax working people to pay for that, the more useless eaters we get, and the higher our taxes become.

    And when people go Galt, and stop pulling the wagon that 50% of the country is riding in, the dollar drops to zero value, and the wheels fall off that wagon.

    Shortly after that, the war starts.

    Not just here, but everywhere.
    1918 got you 1933 which got you 1939.
    It will again.

    Wait and see.

  8. A bigger problem is people living where it isn't practical to live. My wife and I live in a house that is paid off. Instead of doing what so many do and trading up to a bigger, more expensive house, we stayed put.

    We go to places like New York, where rent and house payments are $4-5k a month. For a house that is smaller than ours.

    Our house is 12 years old and paid off. Since we have no housing expenses other than utilities and property taxes, we have plenty of frivolities. We have a pair of new (paid off) cars. We travel EXTENSIVELY. We eat out. With all that, we still put plenty of money away.

  9. Well said, Peter. And NOT keeping up with the Jones' is a key to being able to actually do things one wants to do without going in debt. One of the consequences of 'affordability' is that service people are being pushed further and further out from many areas, increasing the commute and costs for services. It is no wonder those costs are rising dramatically!

  10. 1/4 to 1/2 your annual income on fire? *laughs in British*
    I take home £1200/mo, of which £700 goes on rent, £100 on council tax, and of the remaining £400 or so, you've got water, gas, electricity, and phone at £30/mo each (£120/mo total), £30/wk on food (another circa £120/mo). Give or take that's about £180 per month left even before you spend on anything you might need – insurance, transport, medicine…

    But let's say you can save the whole £180/mo. You can't, but let's imagine.
    A one-bed terraced house, a mere one room wide, will cost you £145k.
    The most I can borrow on a mortgage is £80k. So I need a deposit of £65k.
    Anyone see where this is going?

    At this salary and this level of rent, it will take 30 years to purchase a house.

    The cruel, cruel irony is that this is because the bank "worries" that I might not be able to afford repayments in excess of £350/mo. They simply don't care that renting costs more than double that and if I can't afford that I'll be homeless. They're creating hardship under the guise of preventing it.


  11. People let themselves get talked into buying too much house, just like they buy too much car.

    Keeping up with the Joneses is alive and well.

    Aside from that, the Kalifornia housing market is grossly distorted compared to most other regions of the country.

    The market is overdue, again, for a correction, and it appears to be happening. The unsold inventory of houses in Kalifornia is as very high right now, higher than it's been in quite a few years.

  12. Housing costs vary around the country, with homes costing more the jobs are located. Gov't costs that go beyond property tax, include mandates that city have to comply with, such as trash diversion (think recycling) and in places like CA-New homes must have a water source before builder's can break ground, solar panels are required, new growth must pay for services needed like city fire stations and libraries etc. Zoning changes and other mandates drive costs up, if 1/4 of new homes must be affordable the builder charges more for the other homes to make up the difference in profit per house.
    I have also found most buyers want a totally move in house with all the upgrades provided and don't wish to do any renovations on their own. See the Zero Hedge article on teaching millennial's to read a tape measure.

  13. It always comes down to personal choices. My wife and I made the decision to live in an RV. A cheap RV that we can fix up and modify to our taste. Consequently, we can live on a lot less income. No more wage slave crap… Freedom is wonderful. But we're comfortable with a cheap lifestyle. Some people aren't. How much lifestyle do you want and how much crazy are you willing to put up with to get it?

  14. And the best part? That freedom means I .have more time to invest doing what I want vs what I must. More time with God and my wife, more time shooting and more time reading y'alls blogs.

  15. Hey Peter;

    I will also mention this part, in places that are very "Progressive" there is a lot of property tied up in "Green space" and that also artificially inflates the value of homes that are still there.

  16. This has nothing to do with an American housing crisis:
    6. British research found that the average 10-year-old owns 238 toys but plays with just 12 daily (The Telegraph).

  17. @Duke: On the contrary – I think it's very relevant. What makes you think US parents are any less indulgent than British ones? I'd say it's six of one and half a dozen of the other.

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