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They can't afford to drive around like you used to! (Yes, she has a car)
Even if I wanted one, I couldn't afford one at all. First and foremost, the upfront cost of a vehicle, whether used or new, is significant. You are not going to find a decent car for less than $2,000 more than likely. Insurance is going to take out $300-500. Because of the limited range of options available for cheap prices, you are not going to find a vehicle that gets really high MPG. You might be able to swing mid-30s, so we'll assume 35 mpg. Assuming about 2000 miles traveled a year, which is very little compared to the average American, and gas at $3.50, you are looking at $200 for gas per year. From there, you have to worry about maintenance and fees, which will probably run you about $200 or so a year as well. So you are looking at nearly $3,000 for your first year of car ownership. From there, the recurring costs of insurance, maintenance, and gas will run about $1,000; however, maintenance will increase with time.
Like you said, driving around like others used to just isn't feasible. And it will become impossible in a peak cheap oil world.
But people do not have the wage income to keep up with inflation. That is the problem. In the 1970s when inflation was high, wages increased along with it. Even if inflation was 7% (as it averaged in most of the 70s), and your wages only went up 6%, you still did ok if you owned a home, as that helped you out a lot if you had a fixed mortgage payment. These days, jobs are very unstable and wages are not keeping up. 3% raises are often the best than can be hoped for without receiving a promotion...and that doesn't even include the ever escalating cost of health insurance.
Yes it is much harder now than it has ever been, but the principal is still the same.
Housing for most people is their largest single expense. To fix that expense at today’s costs will only help your finances going forward.
In most parts of the country today you can purchase a serious fixer at a really low price and if you have the initiative to spend your evenings and weekends and vacation time working on it and learning to do the plumbing, electrical, carpentry, and painting you can simultaneously earn sweat equity and learn invaluable skills that will serve you well the rest of your life.
Getting ahead is harder now than it has ever been but it is still possible if you have the discipline to work instead of play. The way things are going though, I am not sure this will be true in the future.
Oh, good grief. There are detached single family homes in big cities, too. I've lived in several.
In San Diego, the only detached single family homes in the "city" part of the city (San Diego is basically all one giant city but it has many suburban towns that simply aren't incorporated as cities) are the ones which are $1,000,000+.
Being in Ohio, you obviously have no idea what it's like to live somewhere where home ownership is expensive. Ohio's average home price is about $175,000. With 20% down (only $35,000) that's only a $650/mo payment, which anyone working full-time can afford, even with a fast-food type of job.
California's average home price is $335,000. With 20% down ($67,000) that's a monthly payment of $1,241, so not only does it take twice as much to make the down payment, it also takes twice as much every month to keep up with the mortgage.
Even at the high end of real estate, Ohio is insanely cheap. A mansion in Columbus will run only about $3,000,000...and the median home price is just $85,000 there! (my down payment on my sub-$400,000 condo I just bought was $135,000, I could have owned a house outright and bought a $50,000 car too in Columbus). Home ownership seems to only be for those of us who are financially well off or those who live in the Midwest and South where house prices are ridiculously cheap.
I think one of the biggest reasons is simply the fact that people will go where the jobs are, and in today's economy, nobody really knows where they will need to go to make their next paycheck.
Because we've figured out that cars and houses are terrible investments.
On the car front, cars aren't worth more than probably $5000. Anything over that is a waste, IMO. I bought my car for like $4000 back in 2004 (it is a 1994 model). I haven't paid a single penny on it since, aside from filling it up with gas and doing normal maintenance and repairs that any car (new or old) would need. I also laugh at people who whine about their $300/month car payments on their $20,000+ vehicles. Those were terrible investments when they could have paid a fraction of the cost for an equally reliable vehicle - shouldn't have bought such an overpriced item!
Housing too. Houses are not worth 6-figure pricetags. They just aren't. You can find decent living accommodations just about anywhere for under $700 a month, yet the average mortgage is around $1200. If you were going to spend $100k on buying a house (which is a lowball estimate, isn't it?) you would have to live there for at least 12 years to make it a better investment than simply renting at $700/month for the same timespan. Once you get up to $200k houses, you have to live there for at least 24 years to "break even" compared to renting, and $300k is 36 years! And for what? To be stuck in one spot the whole time? What happens if you need or want to move? Then you can't just terminate your lease and move out, you're stuck.
Houses and cars are awful investments. Young people like myself have figured it out, and we're staying away from them. Instead, I rent a place for $680 a month, I pay $0 for my car, and I travel internationally every year (2010 - Gabon and South Africa; 2011 - Panama and Costa Rica; 2012 - Finland and Estonia...). I wouldn't be able to do that if I were paying something like $1500/month for my house/vehicle instead.
Last edited by JoulesMSU; 09-10-2012 at 10:38 AM..
Will this trend trickle down into 20-somethings not starting families as well? It's hard to have kids without owning a house (condo/town home) or car...
Houses and cars are awful investments. Young people like myself have figured it out, and we're staying away from them. Instead, I rent a place for $680 a month, I pay $0 for my car, and I travel internationally every year (2010 - Gabon and South Africa; 2011 - Panama and Costa Rica; 2012 - Finland and Estonia...). I wouldn't be able to do that if I were paying something like $1500/month for my house/vehicle instead.
Where do you live? I'm renting a 1 bedroom for $1200 a month and that's cheap!
Or: Why aren't twentysomethings spending themselves into debt?
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