Immigrants moved to the United States with the goal of having better lives and more assets. Buying a home was a right of passage for many people who scrimped and saved to become homeowners. But things are changing: inflation with the current U.S. housing market is outpricing some who would rather own than rent.
Buying a home was once part of the 'American Dream,’ a slogan that meant the U.S. was a land of opportunity for all people. America was a melting pot for immigrants from many different countries, especially people who relocated to escape poverty.
Before the Civil War, primarily British, Irish and German immigrants crossed the Atlantic. Chinese immigrants flooded California for the Gold Rush in 1840 up until 1882. Beginning around 1892, boats brought more diverse groups from Central, Eastern and Southern Europe.
Most who settled here aimed to buy a first home. If they could not afford to live in New York City, one of the major hubs for immigrants to arrive through Ellis Island, they would move to nearby boroughs like Queens, the Bronx or Staten Island.
In those times, buying a home was not realistic for immigrants who came to the U.S., particularly if they did not speak English and were relegated to low-paid jobs. So, the American Dream that incorporated purchasing a home was dead. In 2023, history may well be repeating itself for aspiring first-time homebuyers.
Many parts of America have simply out-priced those in the market to purchase a first residence. According to statistics from Data Solutions, a real estate research firm, median wage earners cannot even afford to buy a new house in 344 of 486 counties in the United States. Translated, that means that that roughly 71%, or three out of four people don't have the funds to buy a home. Until about 2019, there was a boom in the U.S. housing market. But home prices soared 9% that year — and they haven’t gone down.
The national average price of a new home is $257,000, according to CBS News — which means a potential buyer must have a gross income of $67,647. The average gross income of the U.S., $58,214, does not meet that threshold. And the median home price is low-balled for many parts of the country. For example, in Seattle, Washington, in King County, the median home price is $850,000 as of March 2023. Major cities like New York, Los Angeles and Boston, outprice a modest salary.
One recent byproduct is that friends might decide to co-purchase. Sometimes two or three generations live and buy together.
The homeownership rate reached a 50-year low in 2016. What a change from the 1960s when many families owned residences. Part of the problem is coming up with a 20% downpayment, which is $170,000 — not a small chunk of change for most buyers. A new credit score to secure a conventional loan with a lower down payment is about 780. That has increased by 40 points, as per Thelendingtree.com. Another hurdle is that an established credit history is necessary to be considered for a higher-end mortgage.
Millennials, those typically born between 1981 and 1996 (ages 27 to 42) according to Pew Research, are the generation who are heavily affected by the combination of higher interest rates and inflation. Some chose to live at home with their parents after college or delay having children, if they wanted a family, to get on better financial footing.
It does appear that the housing market is challenging for would-be buyers. The interest rate is over 7% — its highest level since 2001. The National Association of Realtors Chief Economist Lawrence Yun made a reassuring five-year prediction on Bankrate. Yun said that even though buying is not at a peak right now, the housing market will not crash and burn. Yun remarked, "A 30% decrease will not happen because there isn’t enough inventory." By 2028, the economist believes housing supplies will level out.
But where does this leave folks who want to buy homes now? Do not give up on the American Dream of owning a property. Arm yourself with information and remain hopeful. Renting is always an option, and moving to a more affordable area could be the perfect solution to get into a starter home.
The opinions expressed in this article are those of the individual author.