Financial Fruitcakes

I sometimes wonder if people who write professionally actually read what they’ve written.  Really.

I came across an article this morning with the interesting title of “The Real Reasons Millennials Aren’t Buying Homes.”  In principle, I’m good with that. Home ownership in the US is declining, and not because the rich are deciding to rent.

The article goes on to cite a report from Bank of America about how affordable homes actually are these days. (We’ll ignore the credibility issue B of A has after being bailed out by the government and sticking welfare recipients with fees for using the debit cards required to access that money, or that fact that since they bought Countrywide, they are a very large player in residential mortgages.)

So the article cites 5 other reasons for Millennials not wanting to buy homes. In theory, no problem there.

However, the second of these five reasons is student loan debt.

Now, let’s think about that. “Affordability” basically means that you can afford to buy something given your income and other obligations (debt). So if you can’t afford a home because of your other debt, how is the home affordable?

Do you really think young adults want to move back in with their parents so they can spend their time on the couch playing video games? Might finances have something to do with that?

Your financial picture is a package deal: it involves income, healthcare costs, car insurance, car payments, rent/mortgage payments, taxes and credit card bills. Disposable income is what you have left over after all this other stuff, and after putting money away in savings. Something is affordable if you have enough disposable income to be able to buy it. It’s not if you don’t.

So, for a growing portion of the population, homes aren’t affordable. And until Congress reduces the burden of healthcare, education and mortgages on US consumers, the US economy is going nowhere.

To paraphrase a former president, “it’s all about disposable income, stupid.”






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