This is certainly a factor, but I think HN's main demographic tends to overestimate the effect of college-related issues on the fortunes of the general population, where college graduates are still a minority. I imagine that the most important factor is the lowered rate of home-ownership.
2017: 33.4% of Americans (25+) have a Bachelors or higher
2007: 28% of Americans have a Bachelors or higher
1940: 4.6% of Americans had a 4+ year education (post high school)
You're right, college graduates are still a minority, but there is definitely a largely increasing. There's definitely more people enrolling than that.
70% of Americans will enroll in a 4 year degree but <2/3 of them will get a degree and 56% will drop out by year 6.Also Full-time students are 55% less likely to drop out of college than students who go to school exclusively part-time.[1]
So while college graduates are still a minority, it doesn't look like Americans who enroll in college are. They are clearly in the majority, and just because they don't graduate doesn't mean they haven't gathered debt.
Graduating does not count as dropping out. Since a 4 year degree does not require completion within 4 years, it makes sense to extend the statistics longer. That way you include people who tried to spend extra time to be able to graduate.
How do US universities work with regards to this? In the UK you don't really need to pass anything to graduate. I've got a BA (Hons), the BA I got for showing up, the (Hons) indicates I actually passed something.
Second I would guess the vast majority of drop outs are within the first 6 months? How many people are going to waste 6 years for nothing?
Somebody needs a pair of math classes to meet the requirements. They ignore it for 3 years. They then begin a 2-semester sequence of really basic math that is pretty much 7th grade (12 year old) level. They drop the first class, tray again and fail, and then pass. They fail the second class, fail the second class again, fail it yet again, and then are prohibited from attempting it because there is a limit of 3 attempts.
> How do US universities work with regards to this? In the UK you don't really need to pass anything to graduate.
In the US you have to maintain both satisfactory overall GPA to not be dismissed and pass a required set of classes (which may include a number of electives) in order to graduate.
Not necessarily. The reasons people drop out are family emergency, cost, personal emergency, and not being able to deal with the workload. Most of these reasons don't necessarily cluster in the first 6 months.
It's actually cheaper to own in many areas than to rent. What stops most people is their inability to save for a down payment and/or obtain a reasonable interest rate on their mortgage, both tools used by banks to hedge against the risk of lending. I'd argue that measures of that risk are somewhat arbitrary and reflect an institutional lack of faith in Americans' creditworthiness. So it's not that people can't own homes because they lack wealth, it's that wealth is hard to come by because they're not allowed to own their domicile.
Renters pay most of the cost of home ownership, with the added feature of being unable to control children’s schooling or meaningfully become part of a community.
Usually the argument against owning your home that is that inflation adjusted returns on real estate are not as attractive as investments in an index fund. In many, and I would argue most scenarios, that doesn’t really matter as the vast majority of people have minimal liquid net worth and renting eats up the cash flow that would allow them to accumulate wealth.
I bought my first and current home when I was 23 and refinanced to a shorter term. I bought near the 2006 peak and due to local market conditions have minimal capital gains, but in the near future will have no debt service costs whatsoever. That means the freedom to make less income, start a business, blow the money or accumulate cash or whatever.
Had I done the smart thing, I would have put 90% (or more, rents rose during the recession) of my current monthly mortgage obligation into rent. To the tune of $300k, allowing for fairly meager savings.
Now if I was sitting on a pile of cash that was a critical mass, and paying rent from my income cash flow, that’s different. But that is a much more rare situation.
> Renters pay most of the cost of home ownership, with the added feature of being unable to [...] meaningfully become part of a community.
Why can’t we become part of the community? I’ve been a renter for a decade now and I think I am more involved in my community via volunteering and local politics than the average person.
Further when I was a kid my single mom rented an apartment — during that time she worked to create a community at our apartment complex. When we moved there barely any one said “hi.” Now, almost a quarter century later she still keeps in touch with many of these old neighbors despite them being scattered all over the U.S.
Renting sucks, we both agree with that. But the trope about renters not caring about the community needs to go — it’s part of the reason apartments are illegal in the majority of California.
Most places in the US have minimal tenant rights. Leases are often 1 year and because of rental price floors geographic rents tend to not vary much.
Geography determines school placements, what little league your kid plays in, who your local representatives are, etc. I don’t mean to cast tenants in a bad light. It’s just hard to have deep roots if you have to move frequently.
The places that are exceptions have rent stabilization or weak markets. Rental markets always devolve into little geographical cartels where tenants have no leverage. But we live in an era where we pretend it’s a real market and dislike regulatory frameworks.
Someone like me is probably more common. You're the exception.
I've chased jobs for the last 15 years, moving to numerous states, several foreign countries, and for the last 8-9 years, about half a dozen different rental in the same metro area.
I have never been involved in my community, met neighbors, or gotten involved in really anything more than a cordial greetings to people I recognize.
I'd love to buy a house, but even the smallest condo in a decent area is $300k and as a contractor, I still have to often change work locations every year or more often. My commute might increase by an hour or more, each way, if I were unable to move close the work site.
I feel this is common for a lot of people these days, especially as marriage and especially children become less common. I have no incentive to be stuck in one place, and have done well to save a lot of money by being mobile and living frugally, without the trappings of typical suburban life.
>Why can’t we become part of the community? I’ve been a renter for a decade now and I think I am more involved in my community via volunteering and local politics than the average person.
If the person who owns your house decided to sell it tomorrow, how much protection do you have? Here in the UK, I have effectively none.
In general there are renters rights and the lease contract survives a sale. When you buy a property you need to look at contracts in place and whether they are incompatible with your desired use.
As far as I am aware, if you are in an assured shorthold tenancy, as the majority of rented homes are in the UK, your new landlord can serve a court order under section 21 for a no-fault eviction.
On the other hand, if you are renting commercial property for a business and have negotiated a lease, then the lease contract holds.
Any comparison of rent vs buy should be made by comparing interest+council rates/land tax paid to rent paid. You also need to be secure in the assumption that your house/land value will not drop. You also need to account for rises in rent. Changes in interest rates... all in all, it's more difficult than it sounds, and advice on this depends a lot on what your local property market is doing. In some places it can go either way.
assume home prices go up 5% and the stock market goes up 7%.
If I want to buy a house for 100k and put 20k as a down-payment and live in the spot for 5 years, I can make 8051$ off the stock market (invest 20k) but my home would have appreciated 27k$.
sure there are some other factors, and maybe my numbers are not right, but I think it gets at what you were saying, an advantage of buying a home is you can make a leveraged investment.
in general, houses appreciate in value over time, but that doesn't mean your house will. leverage multiplies your exposure to the upside and the downside of an investment, and a single house is a much more volatile asset than SPY. imagine how much it would suck to be upside down on that $100k mortgage after five years.
I have half a million I can liquidate, because I bought instead of rented. Many friends said it was a 'bad investment', but when the money gets spent either way, even a bad investment is better than none. It has never been easier to buy a home that you can afford thanks to loan programs and historically low rates, although now rising...
But yeah, even though in many ways a home is a liability, it has equity you can leverage. In many countries, homeownership conveys other perks. In the usa, homeownership is also a strong sign of being a 'good neighbor' as you have skin in the game, while renters see little reward or penalty for being poor neighbors.
There are of course shades of grey and other factors, but in general, the modern marketing to milennials that homeownership is futile or worthless is partly its own downfall.
Right, but it's really only an investment property if you already have somewhere else to live. It's more of a consumable asset with a tightrope walk between transaction costs, upkeep costs, depreciation, and inflation vs market price increases. And if you live there, it's different because to sell it you have to become homeless and/or use the money for new accommodations. Assuming that your investment has done well because housing prices have risen, then your new accommodations will likewise be more expensive too.
It might pay off a bit if you can see it through, especially if you can then move to a lower cost-of-living area, but it's hard to tell 30 years in advance whether you'll be able to keep that commitment and if it will pay off better than investing in index funds or other investments. Certainly some people found out the hard way in 2008 it doesn't always work out that well. In general, it may sometimes slightly beat inflation if you're lucky but under-performs the stock market.
The best real estate investment you can make is your own home. 100% guaranteed occupancy, no property management, 0% turn over, deductions on property tax, federal taxes, etc...
> The core of the "bad investment" argument is that the money doesn't necessarily all get spent either way.
Yes but that is part of the problem with the argument: it basically assumes perfectly rational actors who never cheat contributing to their index fund so they can go do/buy whatever. It’s a lot harder to just not pay your mortgage one month.
