In 2007, almost 70% of adults were homeowners. Then came the recession. Numbers dropped.
But unlike every other number, home ownership did not rebound. It has continued to slide, seeing 64% home ownership today, according to the US Census Bureau.
As we move forward, data is always tracking two cohorts: Americans who are between the ages of 25-34 and those 35 and older. From the younger (potential) homeowners, Freddie Mac explains that an estimated 700,000 young adults refrained from buying a home between 2000 and 2016 because costs outpaced incomes. Under an optimistic scenario, the ownership rate could rise as high as 60 percent over the next decade; whereas in a pessimistic scenario, 55.9 percent. (A percentage point can translate to more than 500,000 more home purchases.)
Which brings us to the second trend…
According to a recent study by Deloitte, the average millennial net worth has fallen under $8,000. That is down 34% when compared to the average net worth of Americans ages 18-35 20 years ago.
Why would that number have gone down, instead of up as inflation rises, as wages increase, and as everything else gets more (dollar-for-dollar) expensive? Per Deloitte, millennials spend about 17% of their incomes on education, health care, and rent. A decade ago, that percentage was 12, a full 5% less. Why?
Health care costs are up 21%, despite promises every year from every political party. Housing costs 16% more than a decade ago as well. But education? Well, higher ed really knows how to up the ante.
Deloitte reports that education costs have climbed 65% in the last decade.
Prognosticators disagree about whether or not house ownership will increase or decrease. But as you look at the other numbers, it’s hard to believe that young home owners will grow. Add that the number of students leaving college with massive debt, the ever-expanding population of the world, and the increasing percentage of people moving to cities, and it seems even less plausible that the rates will climb.
But regardless of pragmatics and logistics, the “common wisdom” of house ownership is also being questioned, by some credible, reasonable sources. James Altucher, financial adviser and YouTube star, makes a living helping people by not purchasing a house. And his advice definitely questions the conventional wisdom approach. From an interview by a fellow YouTuber:
“In terms of an investment, you would never put all of your money into Apple stock, and then borrown 300% more on top of that, and say okay, I just made a good investment.. I think the inflation adjusted returns of home ownership is about 3-4% a year for the past 50 years. Of stocks, it’s like 7.5% (or something like that) , so stocks in general have been a better investment than home ownership anyway.”
Does this mean anything? Who knows. Renting vs owning may or may not make much of a difference in a person’s life. But think about trend two for a moment, especially the part about education as the greatest cause.
Most of you would probably agree that education is under far more attack than home buying ever will be. And it has been for years.
Books like The Coddling of the American Mind or Professor Bryan Caplan’s The Case Against Education are scathing indictments against sending kids to college. They point out that students learn no meaningful skills, do not increase their ability to think critically, nor do they gain the ability to transfer concepts across ideas. Politicians have been crying foul for even longer. Almost every President for the past 50 years has said they would fix education (K-20), yet nobody actually wants to use their political capital on a system that is so dysfunctional and so hard to transform. Parents are upset, business leaders are upset, and even billionaires are on the bandwagon, offering to pay entrepreneurs to avoid college.
But the cause behind the second trend is unlike the first one in a few distinct ways. First, the second trend will likely impact the first. Beyond that though, the second trend does not see much speculation. Almost everyone agrees young adults are getting poorer and it is largely due to education. At the same time, they conclude that education is in trouble and is only going to get worse. And finally, the numbers suggest that in a decade there will be fewer colleges and not more. The alarms and early detection tripwires are definitely making noise.
So what to do? Obviously, at some point, the lack of attention to inflation is going to catch up with schools. Some Governors have already saddled universities with tuition caps, trying to get ahead of things. But between the bloated administrative layer, the unrealistic faculty contracts (and ensuing retirement packages), and the tightening of student loans, is going to mean some very different decisions for many Provosts and Presidents in the near future. They are going to need to have conversations that have gone largely ignored for decades. But it also means a second priority will have to move up the ladder. Namely: teaching and learning.
Again, most senior executives have ignored the problems with learning, spotlighted by (literally) thousands of research studies. Like public politicians, the cost is almost always too high, seeing faculty unions or powerful senates remove sitting Presidents or voting “no confidence” in Provosts who seek change. Or perhaps even worse, are leaders without the knowledge of what quality teaching and learning actually looks like, nor how to engender it at scale.
To this end, I hope we see a lot more “non-traditional” senior executives at schools. The assumption that the traditional path (Chair to Dean to VPAA, etc) is “best” is short-sighted and will rarely foster innovation or transformation, likely seeing more of the same over and over again.
That’s also where groups like this institute and other faculty development organizations can make a huge difference. Whether through consulting or workshops or training or even speaking, learning can come back to the forefront once again. While it is harder than we first realized, we know more about how to encourage true learning than ever before in history. And we can bake it into every experience a student has, every time.
The good news is that these trends are not a guarantee of the future. A small, but growing number of transformationalists are out there, trying to impact all of this and more. And time has a way of rebelling against the status quo.
Good luck and good learning.