This will be a public post. It is a topic we have been talking about over the years here at Notorious, but things are getting to some kind of a critical flashpoint.
This is also not an easy piece to read and it wasn’t easy to write. I would much rather be doing anything else, writing about anything else, but… things are coming to such a point that I genuinely think it’s time to sound the alarm once again. If you would prefer to skip over such heavy topics as the future of the country and real estate’s role in it, please do so. I won’t be offended in the least.
In case you have been living under a rock, there is now overwhelming evidence that something dramatic is going on with the youth of America. Few people seem to know the cause of the problems, and one reason may be that there are multiple causes. As an aging GenXer, it is difficult to know precisely what is happening because I am not living life as a Zoomer or younger Millennial. But even from the outside, even just looking at data, it is clear that something is really, really off with the upcoming generations.
Threaded throughout all of the various commentary about the plight of younger generations is housing. Whether true or not, there is now widespread perception that unaffordable housing costs are driving so much of the dysfunction of younger people. The wrath of younger generations is becoming more and more focused on housing and everything connected to it: our financial system, various laws and regulations, tax breaks, etc. etc.
I think we are about to see some shocking results in 2024 elections because the kids are not alright. At least, I hope we do, because the alternative to the 18-29 block voting their anger is far worse. Once they stop voting for change is when we need to start really worrying.
The Signs
Let’s begin with what prompted this post, which is only tangentially related to the real estate industry. Scott Galloway, a professor at NYU, was on MSNBC a couple of days ago:
When Galloway talked about how young people are checking out of America, and how their rage turns every movement into an “opportunistic infection”… and then I saw footage from Yale, Columbia, Harvard, USC, and elsewhere showing cops fighting with protestors. You’ve seen the footage as well, but just in case:
Maybe this sort of thing is because the protestors really care so deeply about Palestine as an issue. Maybe it’s because they are so pissed off, so enraged, that they’ll seize on any issue, any protest, any march, any movement to vent their rage.
The kids are not alright.
No Woman, No Cry
Then consider what Galloway said about young people no longer meeting, no longer mating, no longer forming families and having kids. That family formation piece is something I’ve been tracking for over a decade now. I wrote this in 2011 and sadly, trends have gotten worse.
If you spend any time on social media tracking what’s going on with birthrates, with family formation, with dating in America… you immediately run into dystopia. I won’t go into much detail, except to say that if you didn’t know about this, you should do some Googling about woes in dating and mating in America in 2024.
The kids are not alright.
The Role of Housing in the Rage and Despair
It is difficult to avoid the fact that housing — specifically the fact that housing is unaffordable — is a major reason for the rage and despair.
Here’s an article from Politico, which is going to be tamer and more civilized than the comments section of your average video on housing, that lays it out:
“Young people are pissed off,” said Antonio Arellano of the liberal youth-vote organizer NextGen America, which targets voters between 18 and 35. “Skyrocketing rents and house prices are especially hard on young people, who are already buried under student debt.” And the cost of housing is a “key voting motivator for the young voters we’re talking to.”
But here’s a bit more actual raw emotion:
And housing is essential to dating and mating. Turns out, it’s real hard to get busy in your bedroom if your mom is in the living room, and hard to convince a woman to take you seriously as a potential mate if you’re living in your parent’s basement.
Evidence? Actual observation of real people would suffice, as well as basic logic of having lived in society for a bit. But in case you need academic studies and such to agree that women don’t go for broke-ass men who live with momma… here you go.
From Heritage Foundation:
The money grafs:
While homeownership is normally a great tool for building wealth, it is also often a precursor to major milestones in life, like starting a family. But with the American dream of homeownership having turned into a nightmare, nearly an entire generation of young people can’t buy a home and are delaying family formation because of it.
And this isn’t simply theory—empirical research published by Federal Reserve economists has already demonstrated that higher mortgage interest rates has a negative impact on the birth rate. That’s because those higher mortgage interest rates increase the cost of homeownership.
If you’ve done everything right — went to school, worked hard, didn’t commit any crimes, didn’t do drugs, etc — and you still can’t even imagine ever owning your own home, which means you can’t imagine getting married and having a family, which means you join the enormous ranks of incels (involuntary celibates)…
Rage and despair are entirely foreseeable and understandable.
Even if you are actually married, it turns out that housing is one reason why we have a birthrate crisis. From NBER (National Bureau of Economic Research):
Housing prices have a significant impact on a family's decision to have children, according to a new study by Lisa Dettling and Melissa Schettini Kearney. In House Prices and Birth Rates: The Impact of the Real Estate Market on the Decision to Have a Baby (NBER Working Paper No. 17485), they find that a 10 percent increase in home prices leads to a 1 percent decrease in births among non-homeowners in an average metropolitan area. However, the negative effect among non-owners is offset by a 4.5 percent increase in births among current homeowners, who are now wealthier. The total fertility effect of an increase in house prices varies across demographic groups, largely because their rates of homeownership differ. The authors conclude that "house prices are a relevant factor in a couple's decision to have a baby..."
There are many reasons why the kids are not alright, but housing is a major reason. We can’t deny it.
Cold Comfort: Money is Broken, Not Housing
My own opinions on this — which can be found here — are, I think, fairly well documented: “I maintain that there has been no actual price increases in the price of houses. Instead, there has been dollar devaluation from massive fiscal and monetary stimulus.” I based that conclusion on this:
(I haven’t updated that chart in a bit; but if you’re so inclined, feel free to update it and send it my way.)
But that is cold comfort in the present situation. When people are broke, feeling desperate, feeling hopeless, and housing is one of the main reasons… talking to them about M2 Money Supply isn’t going to do a whole lot.
We need to do better — a lot better.
Doing Better?
So back in 2023, I wrote this essay here on Notorious ROB titled “Rapidly Approaching Horror: Save the Housing Market or Save the Country.” It was a reaction to NAR research showing that Baby Boomers, rather than younger generations, made up the largest cohort of home buyers:
In that piece I wrote:
If housing continues to be unaffordable for the vast majority of younger people, we will have societal collapse. If only the wealthy scions of wealthy families can afford to buy a home, we will have societal collapse.
Whether that happens through demographics, or it happens through angry populist politics, we cannot expect twentysomethings and thirtysomethings to have nothing to look forward to in life -- much of which revolves around the possibility of owning a home, starting a family, and living life -- and just accept their fates. It won't happen; it can't happen. The despair and the anger in younger generations is not hard to see -- if anything, it's hard to miss.
We'll discuss what possible solutions there may be. But from the real estate industry's perspective, I believe it's time that we discuss a wholesale shift in philosophy.
Instead of trying so hard to protect home values, we should be trying to advocate for affordable housing. The economics are the same for us if we have home prices drop by half, but transactions double. That seems a far healthier situation for the country, for society, and for younger working families than the present situation where homes are incredibly expensive, and we have fewer and fewer transactions.
I followed that piece up a few weeks later with “What Can We Tell the Young?” I pointed out in that piece that even beyond noble and patriotic sentiments about the future of the country, social stability, and the like, just out of pure self-interest, we as an industry need to find something to say to young people that actually resonates.
I wrote back then:
Now… add back all of the altruistic, socially responsible, patriotic and just generally moral sentiments back in. As an industry, we must find something to say to young people caught in this unreal housing crisis that goes beyond “Don’t be poor.”
I think this task is far more important for organized real estate than 90% of the things that we spend time debating, discussing, and spending gobs of money on consultants for. Yet another member survey to discover whether they want Associations to get a TikTok account or not is irrelevant to survival; discovering what the REALTOR Association should message to frustrated young consumers is.
As far as I know, we have seen zero, zip, zilch from the industry as a whole that even tries to do better in terms of communication with younger generations.
We’re still not doing better. NAR is still trotting out the old playbook, as if we’re still in 2012. Here’s Kevin Sears, 2024 NAR President, in an interview with Byrone Lazine from BAM just last week:
Tax incentives for homeownership? Yeah, that will surely resonate with young people shut out of the housing market, said no one ever.
Prof. Galloway said in the first video above about how the two biggest tax deductions are capital gains and mortgage interest, and how that divides the country into those who own assets and those who do not… and increasingly cannot. That we have a very progressive tax system, until you buy assets.
So to young people who can’t dream of buying a house, who are enraged and desperate, our answer is, “tax breaks for homeownership?”
How long do we think this can go on in the face of the rage of the next generation? Self interest alone dictates that we change course and craft a new direction.
One of the things that we all discovered in the aftermath of the NAR Settlement is that public contempt for real estate agents and for NAR and for the real estate industry is deep and wide. Many of us were shocked by some of the sentiments we saw and heard. We won’t be changing any of those attitudes by sticking to the 2019 playbook, and yet… we need to.
The kids are not alright. Neither are we.
The Way Forward… Maybe
I do not pretend to have all of the answers. If I did, I would be doing something very different with my life. But I do have thoughts.
As organized real estate gathers later this week in Washington DC, to go lobby Congress for more tax breaks for homeowners, I’d like to repeat a suggestion I made back in 2019 in this post, calling on YPN to embrace a new mission:
YPN should be, must be, the group that puts housing affordability front and center of the agenda across the real estate industry. The next generation of leaders must address the issues of the next generation of consumers whose main concerns are not flood insurance or availability of loans or net neutrality but affordable housing. The YPN must slant REALTOR politics away from homeowners to home buyers and potential home buyers, even if that means advocating policies that result in drops in home values and REALTOR commissions.
I’m going to expand that now.
In the aftermath of the changes to compensation schemes, in the aftermath of the rage against the REALTOR Machine that event revealed, in light of the obvious ongoing crisis with younger generations, all of real estate must slant politics away from homeowners to home buyers and potential home buyers.
That does NOT mean making more loans available at unaffordable rates so home prices can keep skyrocketing. That means bringing the price of housing down or bringing income up so that the average 27 year old with an average job can think about buying an average house.
Yes, the underlying problem is broken money. We can’t do much about that. That’s a macroeconomic issue that the whole world will have to confront. But broken housing is the more proximate problem causing rage, despair, and soon-to-be-seen pre-revolutionary politics in the United States. And maybe, just maybe, we can do something about that.
Because the kids are not alright. Housing is a major reason why. We can have a role in fixing housing, or we can have a role in maintaining the broken system.
History — and future electorates — will judge us accordingly.
-rsh
One of the things I’ve seen have an impact here is remote work. Understanding that not everyone can do it I have seen young people buy in more affordable locations when they could work from anywhere. The ridiculousness that you must be in an office with crappy commutes and reduction to quality of life for corporate success was clearly disproven during COVID. I watched many young people move to more affordable areas and buy their first home without the pressure of geographic restrictions. Just a thought.
Well done Rob. I'm wondering what a role life expectations and image play in this. At a weekend soccer tournament for my daughter we stayed in an embassy suites which led my daughter to comment on it being the worst hotel ever. No...the embassy shuts in an Ohio suburb is not in the bottom 2/3. Then I look at college housing. Have you seen the housing and amenities? I'm not saying this as a "back in my day" because im not jealous. I am an excessive social media user but I can sit back and see that there may also be an expectation and image issue that leads to the traditional clinging of housing availability. The shit hole I loved in during college contributed to be best years of my life.