The majority of minimum wage workers in 1968 could support a family of 3, above the poverty line, on their single income. Obviously, that is no longer even close to being true.
The staggering rise in the cost of absolutely everything, even within the last 10 years, leaves the incoming generation of adults with little hope of home ownership.
GHS senior Cody Malessi commented, “Every home in the area is at least half a million dollars, if you’re lucky enough to find one that low-priced”.
The California minimum wage has risen from $1.65 ($13.44 with inflation) in 1970 to $15.50 today. About a $2 increase in pay, not bad but can it cover the rising costs of everything else?
The median home price in California rose from $24,000 in 1970 ($195,421 with inflation) to $747,352 today. A nearly $500,000 increase.
The cost of public and private school tuition has increased by 310% and 245% around the country.
Gen Z is paying 57% more per gallon of gas than baby boomers did in their 20s.
No, the $2 increase in the minimum wage did not cover everything else. Adjusted for inflation, careers around the country haven’t fared well either.
Now, this new generation has a staggering 86% less purchasing power than baby boomers when they were in their 20’s.
Generation X entered an economy with less opportunity and social mobility than that of baby boomers as well. A member of GHS staff confirmed they purchased a California home 10 years ago. In the time since making their purchase the house has more than doubled in value to 2 million dollars.
Ten years ago the average salary in California sat at around $60,000. Since then, the average salary has gone up by $5,000 to $65,000. Generation Z is entering a market where a home is over two times as much as it was for generations just before them, with an average of only $5,000 more a year, with money worth 32% less.
The average salary in 2013 ($60,000) was worth $80,195 in today’s money. California’s median salary today is $65,535, a figure about $5,000 more than 2013’s median salary on paper but $15,000 less in spending power.
That GHS staff member’s home could be reasonably mortgaged for under $4k a month, using a standard 30 year fixed mortgage and 2013 interest rates. To buy that same home today for it’s current value, using the same 30 year contract and today’s interest rates, you’d be paying $14,000 a month.
As a rule of thumb, common financial advice states housing shouldn’t surpass 30% of your average income. If you would like to buy a California median priced home today ($761,700) for 30% of your income after putting 20% down, a person would need to earn roughly $200,316 per year. After putting 20% down of course($152,340). A median home in the bay area is now valued at $1.3 million, for the purposes of this article we’ll abandon hope there and use California’s median.
“I thought leaving the bay area would make home ownership possible but, I’m starting to doubt whether I’ll ever own a home” said senior Julia Cuison.
Bottom line, buying a median priced home in California requires you pay $152,340 up front and make about $200,316 a year so you don’t drown in debt over your 30 year mortgage. If you would like to buy outside the bay area the FHA loan limit falls to $420,680, so you’re on the hook for $341,020 out of pocket.
In other words, to buy an average, ordinary home in the state you need to be in the top 12% of earners in the entire country for 30 consecutive years, and have over $150,000 up front.
“Alright, so I won’t ever own a home” commented senior Jack Varagas.
Ten years ago, homes were selling to Gen X for less than half the price they are today. Sixty years ago, Baby boomers could buy a home in the state for the cost of a 2023 down payment.
“I should’ve bought a home in 2008 instead of watching PBS kids. Why didn’t I think of that” remarked senior Isabelle Hart when told the statistics.
More so than the previous generations of adults before them, Generation Z, and to a smaller extent Millennials, are entering a world where the cost of living has increased tremendously, far surpassing the normal rise of inflation and outpacing all wage increases.
California is suffering uniquely from the housing crisis due to the high cost of living, but housing around the country has shot up in price in recent years as well. Considering the lower salaries other states average, buying a median priced home in another state won’t affect your ability to afford a home as much as you may think.
A brutal economy seemingly completely stacked against new buyers is the reality for teens and young adults with dreams of owning a home.
