Americans Make Income Gains, But Dream of Homeownership Slipping Furth

Earlier this month, the US Census Bureau released some good news. Median household income rose to $56,516 in 2015, up 5.2% from a year earlier. It marks the first increase in median income since 2007, the year before the Great Recession started.

It’s definitely a good sign that the economy is making a comeback after sputtering for the past eight years.

So why aren’t more consumers rejoicing? Because even as incomes rise, they aren’t keeping pace with the price of an average new home.

From June 2012 to June 2016, the average price of a new home jumped 31.8 percent, from $271,800 in 2012 to $358,200 in June of this year. Prices for existing single-family homes have jumped by 21.2 percent from Aug. 2012 to Aug. 2016, according to the National Association of Realtors. That’s good news for existing homeowners, but it’s just another hurdle to clear for a first-time buyer.

As the economy improves and incomes rise, there is pent-up demand for single-family housing. But, builders continually aim for high-end customers leaving the working-class, middle-class and entry-level buyers with few options.

Even rental properties tend to cater to the high-end customer. In Atlanta, for example, 91 percent of multi-family housing projects were aimed at high-end customers in 2015.

Millenials, the generation between the ages of 18 and 34, now outnumber Baby Boomers (ages 52 to 70) 75.4 million to 74.9 million. Given that Millenials are at the early stages of their careers, their salaries simply don’t match up to average new-home prices.

Millenials are the largest group of consumers in the United States, demographically speaking. The real-estate industry needs to wake up to the fact that we are pricing too many people out of the American Dream. We must look for ways to provide more affordable-housing options that cater to young buyers.

Projects like Solo East Condominium development in Nashville, Tenn., (full disclosure, I’m a partner in the project) represents the type of housing that more developers need to build in the coming years. The development is in an up-and-coming Nashville neighborhood, is moderately priced, and includes high-end amenities such as granite counter tops. This type of development, either as a rental or as purchase, is needed to fill current and future demand. Fortunately, we’re seeing other developers following our lead in East Nashville.

Working Americans – policemen, firemen, teachers – and young and upcoming families need their housing needs met, and it’s up to the entire industry to come up with affordable solutions. Otherwise, the American Dream of homeownership is going to collapse under its own greed.