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AMONG THE 16 MILLION who served during the Second World War, many returned home, started families and pursued what would become an integral part of the American dream: homeownership. It’s during this time that the term “starter home” was coined.
My grandfather was one of those proud vets. He and my grandmother bought a place in South Dakota, where they started our family.
In 1950, the average new single-family home was 983 square feet. Fast forward to 2004 and that number had more than doubled to 2,345—a supersizing worthy of the title McMansion. My grandparents’ version of the American dream was smaller than the current iteration, and I’m confident they wouldn’t have been comfortable with today’s starter castles.
It turns out many millennials also feel that way. The millennial generation, our nation’s largest ever, has been almost 10% less likely to buy homes than Gen X and the baby boomers. While there are many responsible factors, such as a desire for urban living, rising costs and student loan debt, I submit it’s also due to a change in values.
Should millennials continue opting out of homeownership, and should older generations wish to downsize, what will the state of the resale market be? How will this impact you and your long-term goals? If I were the owner of a 3,000-square-foot house with multiple stairs to climb, I would wonder how many potential buyers there are—and what they’d be willing to pay.
Housing has become so expensive that working class families have been priced out of many of America’s biggest markets, especially urban areas on the two coasts. Indeed, the odds are, housing is your biggest expense. According to many financial experts, you shouldn’t spend more than 30% of your gross monthly income on housing. Are you?
Grandma and Grandpa were financially successful, and yet they never owned a house larger than 2,000 square feet. They didn’t like debt and they never felt they were house-poor. Take a look at your housing situation and ask yourself, “Are you living your American dream—or someone else’s version of it?”
George Grombacher is the Chief Community Officer of Money Alignment Academy, as well as the host of the Money Savage podcast. He works to help people lead happier and more contented lives, with a special focus on money. George’s previous articles were Taking Advantage and What I Value. Follow him on Twitter @GLGrombacher.
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Excellent insights, thanks for terrific post!
You can spend less than 30% of income on your house and still be spending too much, especially if it’s a a 30 year loan. If you keep it to a 15 year loan, it will naturally limit the size of the home you can buy.