This Florida real estate agent warns that the US ‘renters economy’ will destroy any retirement hopes for young Americans — here’s his math behind it – AOL
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Being broke and struggling in your 20s used to be a rite of passage for college graduates. For many, it was a necessary stage to pass through right before you’d hit your stride in your 30s, steadily building a net worth you can coast on later.
But many young people are finding the wealth they have managed to build up by their mid-careers isn’t affording them the kind of cushy lifestyle they’d expect — let alone allow them to dip a toe in real estate.
And that’s got Orlando real estate agent Freddie Smith worried about what it means for this generation by the end of their careers.
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“My biggest concern with our country turning into a renters’ economy is: how will the millennial and Gen Zers retire comfortably if they don’t own a house and are going to have to rent forever?” he said in a recent TikTok.
Retirees in 2024 are already worried about their Social Security checks shrinking over the next decade. But Smith wonders if the next generation will even be able to retire at all.
The numbers don’t add up
Smith explains the math behind his fear that the current high housing prices could jeopardize the next generation’s ability to retire.
Smith and the Federal Reserve find that the median price of a home in the U.S. is around $400,000 ($417,000, to be exact). But most young Americans can’t afford that these days.
At that price point, young Americans need to be prepared to put down $80,000 to hit the recommended 20% down payment. The Bureau of Labor Statistics reports that the median yearly earnings for 25- to 34-year-olds is $56,160 — which, with prices still elevated across the country, makes it hard to set aside the amount needed.
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Retirement may not happen
For many people currently thinking about retirement, their home is a big part of their nest egg. Say they bought a home in 1994, when the median home price was $130,000, according to the U.S. Department of Housing and Urban Development’s historical data.
In the decades since, the median home price has ballooned to $417,700, according to the Federal Reserve’s latest numbers, leaving many homeowners in the enviable position of being able to sell their homes for three times the price they originally paid.
But Smith points out that young people won’t have this option if they can’t afford to buy a home in the first place.
What needs to change?
Smith blames institutional investors — such as hedge funds — for taking over the housing market and jacking up prices.
But you can’t solely blame investors for the housing crisis. Smith also wants to see “systems” implemented to help younger generations prepare for retirement.
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