If people can't save for a down payment, they can't save for anything
Freddie Mac is out with a survey on US housing today and the results are illuminating.
What stands out to me is that 72% of low-income renters said getting together a down payment is an obstacle to home ownership and 39% said it was a major obstacle.
That matches with a lament from the Fed's Bostic, who said earlier this week that saving for down payment was a surprising problem in the Atlanta Fed region, despite generally low home prices. In Atlanta itself, it's not hard to find a nice detached home for $150,000, so that's a $30,000 down payment.
Is that really so hard to save up?
For some people, it is. There are millions of working poor people. Many of them are struggling as single parents, carrying huge student loans or stuck in low-paying jobs. It's a tragedy and it's inescapable.
But the above survey measured middle-income earners. In many (most?) cases that should leave something left over for savings.
It's increasingly clear to me that there's another category of people: those who just can't save. This is a bit taboo because there's a blurred line here. Everyone is struggling in one way or another and there are so many costs.
But I also think that there is a problem of people who can't deny themselves of anything. Spending on eating out, entertainment, vice and needless things is the problem here.
I believe advertising and credit are the culprits. The day someone turns 18 they can get a credit card. There's often no time in someone's life where they learn to deny themselves of small luxuries. So it's not just credit card debt but also the habits that come along with the inability to save.
Advertising is another thing that's tough to quantify. Everything thinks that it doesn't really work on them; but it does. It works on everyone and it works better all the time. The number one focus of big data this century has been advertising. Internet companies have increasingly personalized profiles of you and you're hyper-targeted. The methods are getting smarter and smarter.
So while this manifests itself as a housing issue right now, the looming disaster is retirement savings. If you're a middle-income earner and you can't save for a down payment now, how are you going to save for retirement?
It's going to be a disaster.
