The American Nightmare
By Alexis Guillory
Whether your idea of the American dream is living on a ranch with trees as far as the eye can see or living in the heart of a metropolitan city looking down from a condo 30 stories in the sky, the hallmark of the good life is a home. The idea of being able to work toward purchasing a space in which you can start a family and create memories has been the core of American culture nearly since the country’s inception. So why has that quintessential dream become a nightmare for the next generation of homeowners?
Rapidly increasing home prices and interest rates coupled with stagnant wages have turned the excitement of purchasing a home into a daunting task and almost unrealistic prospect. Since 1960, median home prices in America have risen about 120 percent while the median household income has only risen by about 30 percent. Although these percentages have grown farther apart exponentially over the last 60 years, we have witnessed home prices increasing at an alarming rate, especially over the last two years.
I entered the residential construction industry in 2018 after my time at Texas A&M University where I received an undergrad degree in Construction Science and a minor in Business. Since that time, I have worked as a project manager, estimator, and selections coordinator for two luxury home builders in Houston, Texas. Prior to 2020, estimating the cost of a home was very straightforward. Using historical data, we could predict the price of the land, building materials, labor, plumbing, electrical, and decorative finishes within about five percent of the individual scope of work. However, over the last two years we have experienced quarterly price increases ranging from 10-20 percent on most of the components that go into building a home. While we all assumed prices would return to normal after the pandemic, they have continued to rise at astronomical rates with no off ramp in sight.
Not only have the base costs for materials increased but rising interest rates have priced many people out of the home search. Between January and October of 2022 interest rates have more than doubled for a 30-year fixed mortgage. Essentially that means that the monthly payment on a $400,000 home would be an additional $700 per month if purchased today versus the beginning of the year. To break that down, a new homeowner would pay an additional $252,000 in interest over the course of 30 years… more than half the cost of the home.
Even with well-paying corporate careers, an entire sector of the population can no longer afford to live the American dream. The Biden administration has led the country down a path of extreme inflation, and the housing market is only one indicator of much larger issues happening within the American economy.
Alexis Guillory is a construction estimator and selections coordinator at Frankel Building Group. She specializes in luxury residential construction throughout Texas.
Featured photo by The Inspired Room
