There seems to be a consensus that baby boomers had it easier. This chant gets especially loud when talking about the real estate market.
Ask nearly anyone under the age of 45 and they will tell you that baby boomers scooped up “all the cheap houses”. Worse yet, they’ll say it’s largely boomers’ fault that the younger generations can’t afford a home.
In a time where home affordability is at historic lows, it’s no wonder we’re hearing this more and more.
In fact, I’ve been seeing this graph get tossed around a lot this past week:
Gosh, us poor millennials!
Baby boomers sure had it easy, huh?
Well, the reality is they did not. In fact, baby boomers had it even harder than those buying homes in 2022, or even today in 2024.
While that may not seem obvious from the above graph, and it sure isn’t in line with the current narrative, that doesn’t make it any less true.
In this post I’m going to tell you why that graph above is utter garbage, why baby boomers actually had it harder, and how you can be smarter about consuming content like this.
Let’s go!
The Problem With Top Line Data
The massive issue with the chart from above is that it leads you to believe you can make a conclusion based on the numbers.
The reality is you can’t.
Why?
Because median household income and median home price are simply top line data that, by themselves, tell you very little.
Not sure what I mean?
What if I told you my friend is 250 pounds? You’d probably picture a very overweight individual.
That would be most folks’ first thought, especially if I said it in a way that might even help support you jumping to that conclusion.
But what if this was my friend…
You see, you didn’t think to ask how tall my friend might be.
Lebron James is a towering 6’9”, so weighing 250 lbs isn’t all that concerning or surprising.
We needed more information, or data, to determine whether or not my friend was overweight.
And that’s exactly what’s happening in our baby boomer vs millennial chart above.
Baby Boomers Had It Harder… Here’s The Proof
If median income is our “weight”, like in my fictional example, what is our “height” input?
It’s simple.
To compare true housing affordability across different periods in time we need to drill down to what our mortgage payment would be during those years.
To do that we’d simply need the average 30-year fixed mortgage rate for each year to calculate our monthly payment.
With that, we can compare it to median household income and make a judgment as to whether 1985 was more affordable than 2022.
When we do, here’s what our chart looks like:
Yep, that’s our Lebron moment right there.
It turns out, despite the differences in median household incomes and median home prices, housing affordability was a fair bit WORSE in 1985.
You see, in 1985 the average 30-year mortgage rate was a whopping 12.43%.
And that’s not the worst of it. I painstakingly did these numbers going back to 1965…
Here’s a link to my data if you’d like to take a look.
The 1980’s were pure hell for housing affordability.
The least affordable year to buy a home, 1981, would have required\ 40% of your gross income to just your mortgage payment.
That doesn’t include property taxes and insurance.
Brutal.
Hopefully, millennials are feeling a bit less sorry for themselves now and experiencing a sudden wave of empathy for what their parents endured.
One can hope…
It’s pretty humbling to look at the data this way (the correct way) and realize how easy we had it from 2011 through 2021.
Those were the most affordable housing conditions we’d experienced since the pain that started in 1974.
I imagine it’s also a bit unsettling for some folks to look back and understand just how long housing affordability can remain stretched.
The year 1979 is notable because it was the first time it required more than 35% of gross annual income to pay the median mortgage.
It didn’t get back below the 30% mark until 1992… some 13 years later.
Throughout that time, interest rates remained elevated and home prices continued to trend higher.
Do we expect the next 10 years to be any different?
What Can We Learn From This
It’s hard to see top line data and not have a knee jerk reaction to it. That’s exactly what these charts, graphs, and headlines are designed to do.
They don’t want you to stop and think but instead shout… LOOK HOW TERRIBLE EVERYTHING IS!!!
Why? Because that’s what gets clicks.
This logic applies to things like housing affordability, credit card debt, crime statistics, you name it.
I encourage you to think a bit harder and, if necessary, do a little legwork to see if things are really as bad as the mainstream narrative is making them out to be.
I promise you, they are not.
History is long, and runs deep.
There are very few hardships or struggles that we experience, if any, that have not been lived and experienced before us.
Another takeaway is to look at the 1980’s and the extreme unaffordability we experienced during that time.
What happened to housing prices? Did we finally crash to bring affordability back to “reasonable” levels?
Nope.
In fact, prices just kept going up.
It wasn’t until 1990 through 1993 when we finally experienced essentially flat home price growth.
Now that you know that homes are more affordable today than they were in the 1980’s do you think it’s a reasonable expectation that we’ll experience a crash?
I didn’t think so.
Can you imagine in 40 years the current generation screaming about how easy millennials had it buying such “cheap” homes?
I can.
Lastly, we can look at this all as a positive thing. The reality is baby boomers had it MUCH harder than the current generation when it comes to housing affordability.
And guess what? They turned out alright!
Things will likely get better as time goes on.
We can recognize our good fortune right now, understanding that things could be worse, or complain and do nothing.
I’m not a complainer.