The Real Reason People Can't Afford Homes

Jan 24, 2008 by

Many articles about personal finance contain substantial errors or biases. I recently came across a particularly memorable such article, Why You Might Never Own a Home, by Lauren Barack. The first sentence should be a tip-off:

Cathy Mano, 44, works at a nonprofit in San Francisco. Her husband is an acupuncturist. The two pull in a little less than $100,000 a year together.

Whether or not there is a “middle-class crunch,” the Mano family is bound to be stressed. Barack’s colleagues at MSN Real Estate declared that San Francisco is the country’s second most over-priced city, with a cost of living higher than New York. Nonprofits typically have lower wages than for-profits. Regardless of the economy, if Mano wishes to own a home, it would be wise for her to either leave her present line of work, or to leave San Francisco. It shouldn’t be surprising to hear her state, “We can’t afford to buy a home.”

 Barack then interviewed Linda Sirois. She stated:

 Sirois’ son, at 29, has many of the trappings of middle-class life — a nice car, an iPod. But a home still seems out of reach. “It’s much harder than it was when we were starting out,” says Sirois, who considers herself middle class. “We paid $16,000 for our first house. You can hardly buy a car for that now.”

Assuming that the first home was born at approximately the time of her son’s birth, it was purchased thirty years ago. According to, a $16,000 home purchased in 1978 would cost $92,000 today if its cost the same relative share of Amercian GDP. While you cannot buy a house or many cars for $16,000, the Sirois family has forgotten that their son also likely earns far more than they earned thirty years ago due to inflation.

While it is obviously clear that Americans are increasingly having difficulty keeping their homes, we must still discuss the issue in a sensible fashion. The real problem is that many people are facing declining wages. Furthermore, expenses are increasing in large part due to the rising cost of necessities. The cost of healthcare has increased faster than inflation, and the price of fuel has risen rapidly in the past several months. There are many problems faced by today’s consumer, but Americans today, as always, are free to live in which ever city or town they wish, and may work in any industry for which they are capable. For those freedoms, we should be thankful.

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