US college graduates cannot afford the glorious consumerism that has come to define the nation
Once upon a time, achieving the American dream required a bit of consumerism, like owning a home and an automobile. Today, however, an increasing number of youth, confronted as they are with deep economic uncertainty, have stepped back from chasing the seductive illusion.
In what has become something of an American rite of passage, millions of young people each year leave the family nest and head off for university, which is typically followed by starting a career and family of their own. Yet the decades-old tradition has suffered a setback of late as many graduates are scampering back home once they get a taste of the harsh economic realities beyond the sheltered college campus, like affording their own home or apartment.
Not since the aftermath of the Great Depression has the US witnessed anything like it: 45% of all Americans ages 18 to 29 – about 23 million young men and women – are still living with their parents, according to a survey conducted by Harris Polls on behalf of Bloomberg News.
The newfound preference for life in the familial basement is no surprise considering that mortgage rates currently stand at a 22-year high (7.23% on a 30-year fixed-rate mortgage), while house prices have gone through the proverbial roof. For the second quarter of 2023, the average sales price of homes sold in the United States was $495,100, just $60,000 below the record average price set at the end of 2022. Since the beginning of 2019, the cost of buying a home has risen by more than a hundred thousand dollars. Not surprisingly, mortgage demand has recently sunk to a 28-year low, with applications down 44% from last year.
Meanwhile, the prospects for new American graduates renting an apartment or a house are not much better. The median asking rental price in August was $2,052, up 0.7% from July and just $2 less than the all-time high set a year ago, according to real estate brokerage firm Redfin. Yet it’s not just greedy landlords who are to blame for keeping America’s college graduates at home with their parents. Indeed, it would be impossible to speak about the gloom and doom in the US housing market now plaguing prospective buyers without mentioning powerful new monsters on the block: institutional investors.
During the financial crisis of 2008, when US consumers were crushed and banking institutions were bailed out, investment firms like BlackRock, JPMorgan Chase, Goldman Sachs, and Capitol One discovered a deviously simple way of enriching themselves at the expense of the 99 percent. They began a nationwide campaign of purchasing hundreds of thousands of medium-priced residential homes and then renting them back to the American people at a handsome premium. In the majority of cases, home sellers could not resist the aggressive tactics of these omnipotent corporations, which involved outbidding their opponents with cold hard cash. This bulk-buying of real estate, aside from turning America into a renter nation, has had the effect of inflating home prices across the country.
“That’s the big downside,” Daniel Immergluck, a professor of urban studies at Georgia State University, told the New York Times. “During one of the greatest recoveries of land value in the history of the country, from 2010 and 2011 at the bottom of the crisis to now, we’ve seen huge gains in property values… and instead of that accruing to many moderate-income and middle-income homeowners, many of whom were pushed out of the homeownership market during the crisis, that land value has accrued to these big companies and their shareholders.”
Incidentally, whether planned or not, all of this sounds suspiciously in sync with the World Economic Forum’s unofficial motto, ‘You will own nothing and be happy,’ a mantra for modern living dreamed up by Ida Auken, a member of the Danish Parliament, which appeared on the WEF website.
Yet there is one thing that young Americans still own at this early stage in their lives, and that is a hefty college loan, together with credit card debt, which helps explain why so many graduates feel as though the American dream is nothing more than a mirage in the desert.
According to a July survey by Life and My Finances, half of borrowers do not earn enough to cover the cost of their student loan payments, which is even more concerning considering that former president Donald Trump gave borrowers a three-year moratorium on their payments (coming due again in October). This desperate state of affairs has caused many young people to question the real value of a college education that will just saddle them with debt for many years (Americans have $1.77 trillion in federal and private student loan debt as of the second quarter of 2023). The disillusionment appears to be reflected on university rosters as there were some 662,000 fewer students registered in spring 2022, a 4.7% decrease from the previous year when the Covid-19 pandemic was at its peak, according to the National Student Clearinghouse.
All things considered, it seems there hasn’t been a more challenging time to be a college graduate when so many systemic problems are working against them. But at least many of them can find solace in the knowledge that they can take refuge at their parents’ home until the storm has passed – and maybe even save some extra money, which ranks as the number one reason (41%) US college graduates opt to live with Mom and Dad, followed by: taking care of older family members (30%); being unable to afford to live on their own (30%); helping out with family expenses (28%); COVID concerns (24%); saving for a down payment (24%); paying down debt (19%); staying temporarily until they move to new place (17%); recovering financially from emergency costs (16%); losing their job (10%); receiving help with childcare (6%); and other reasons (11%) (respondents selected all answers that apply).
As Dorothy knew only too well in the Wizard of Oz, “there’s no place like home.”
