- 13 Apr 2021 03:19
#15166324
The middle classes are stuck in a housing-income trap. We've been seeing housing prices explode in many cities for many years, and how is that costing us? 50 years ago most wives stayed home and their husbands worked, and most couples could still afford a home. Now most wives work, so we have many dual income households. If households almost doubled their income, where did that extra money go? Well much of it goes into mortgages via bidding on houses, since all couples are still competing in bids on homes.
Let's say middle class incomes go up another 30k per person. Over time a lot of that income is going to go right back into housing bids due to their competitive nature. So no matter how much average incomes go up for the middle class, their standard of living will never go up very much as a group. They're just paying more for the same stuff (inflation).
Imagine how much better off the middle classes would be if house prices only went up ~4% per year and they had an extra $500-1000 every month in mortgage savings in their pockets to spend on other things. Everyone would be retiring earlier and driving nicer cars and having more kids etc. Most other industries would be making more money also if household spending in those industries increased.
With the status quo most people are stuck in a hamster wheel while the developers win, the banks win, the real estate agents win, and everyone else loses.
Let's say middle class incomes go up another 30k per person. Over time a lot of that income is going to go right back into housing bids due to their competitive nature. So no matter how much average incomes go up for the middle class, their standard of living will never go up very much as a group. They're just paying more for the same stuff (inflation).
Imagine how much better off the middle classes would be if house prices only went up ~4% per year and they had an extra $500-1000 every month in mortgage savings in their pockets to spend on other things. Everyone would be retiring earlier and driving nicer cars and having more kids etc. Most other industries would be making more money also if household spending in those industries increased.
With the status quo most people are stuck in a hamster wheel while the developers win, the banks win, the real estate agents win, and everyone else loses.