Why You Can't Afford A Home

The American’s ability to own a home has been weakening for decades. The “American Dream” is a term millennials have heard but have hardly been able to benefit from it. “It couldn’t be this hard for our parents,” is a thought of 30- and 40-year-old adults trying to figure out how we can work just as hard, or harder, and not be better off than our parents were.

The trends are bad and are showing signs of continuing in the wrong direction. In 1985, The average first-time home buyer was 29 years old. Today, people are waiting until they’re 40. The median mortgage debt in 1983 was $21k. In 2022, that amount was $155k. We have to face the bad news; this can get worse.

Why are homes so expensive?
Why is life so financially difficult?
Why do so many middle-class Americans feel they are barely above the poverty line or even below it?
The prosperity of America can’t only be for the wealthy few, is it?

The main reason why we have a home affordability crisis in the US is simply because the price of housing has increased at a rate much higher than the median household income levels during the same period. In 1985 median household income in the US was $23k and the median home sale was about $83k. Homes were 3.6 times the median household income in America. But in 2025, that number is $83k with the median home sale of $416k. That means home prices are now over 5 times the median household income. Compared to our parents, we must have much more of our income tied up in mortgage and rent payments just to survive.

Some of the causes of the increased pricing of homes comes from zoning restrictions and more two parent income homes. The zoning restrictions that began during Reagan’s administration leaves less land for builders to work with, naturally decreasing the supply of homes. Most households with two adults require both to work in order for them to have the lifestyle they want. Two incomes homes have more income to bid up on the homes they want to buy. These two factors are major contributors pushing up the prices of homes. But there’s one even more significant.

A major contributor to the housing affordability crisis that isn’t discussed much is the disappearance of the “starter home”. Starter homes are simply not being built. Without the supply of starter homes, the first steppingstone to building wealth in America has become virtually non-existent.

New build starter homes in the 80s were 900-1400 sq ft with 2-3 bedrooms and 1 bath. Now, they’re 1,800-2,500 sq ft with 3-4 bedrooms and 2-3 baths. Additionally, it’s hard to find a starter home without a deck, garage, or fireplace. All amenities that drive the price of the home upward and out of the range of the people who need to afford these homes but can’t.

The smaller homes used to be in the affordable range for the middle and low-income earners in America. The new “starter homes” have increased 70-80% in price but wages for lower income earners have grown only 7.8% during the same range.

The flip side of this is the adaptive behavior we have to the pressure of the world. Everyone wants a nice house. The more pressure we feel from comparing ourselves to others, the more we don’t want to buy that small house. Too many people who need a starter home lack the humility to have a housewarming for a home that isn’t big enough to fit all the guests you’d like to show up.

We don’t want to be seen as someone in the starter home phase. Instead, we’ll rent a house that is closer to what we want but can’t afford to buy or rent an apartment when we could buy something on the smaller side to get started building wealth.

Frist time home-buying is like the environment high school athletes have to navigate now that college coaches are more willing to pull talent from other college programs instead of the traditional route of high school recruiting, forcing student-athletes to take opportunities at smaller schools. Now, younger home buyers have to let go of the “American Dream” of the past where it was relatively easy to buy your first home. They now have to be more open to smaller townhouses and condos as the natural 1st step to home ownership.

The trends over the past few decades point to a clear issue. Homes are too expensive, we need more and different types of homes to be built, and our wages aren’t putting us in position to own homes. We have a complex problem that needs intervention.

Many of the Reaganomics policies that created this scenario need to be repealed. This would benefit the employee and consumer more than the shareholder. Unfortunately, that’s not what our government is interested in doing so don’t expect them to reverse their course of padding the pockets of the rich. We must simply be knowledgeable about what’s happening and position ourselves the best we can to take advantage the few opportunities we have.

Federal Reserve Bank of Minneapolis: A Rising Tide Lifts All Homes? Housing Consumption Trends for Low-Income Households Since the 1980s

Changes in U.S. Family Finances from 2019 to 2022: Evidence from the Survey of Consumer Finances October 2023

Survey of Consumer Finances, 1983: A Second Report

Changes in Family Finances from 1983 to 1989: Evidence from the Survey of Consumer Finances