May 22, 2022
Written By: Andrew Hallam
My wife and I were about 20 miles south of Mulegé, a small Mexican town on the Baja Peninsula. We pulled our camper van onto a beach called Playa Escondida. About a dozen small campers faced the bay, and I soon began talking to a young couple with a truck and camper. They had driven down from Victoria, British Columbia for a three-week vacation.
He worked as a photographer. She was a nurse. And they were homeless. For them, rising home prices were like bouncers who kept shoving them away from home ownership. But they had an out-of-the-box plan to afford a down payment. For the previous two years, they lived in their camper on Victoria’s city streets. As a nurse, she showered every day at the hospital where she worked. He had a gym membership, so he showered at the gym. Sometimes, they splurged to pay $600 a month to stay in their camper at a trailer park. But most of the time, they stayed on dead-end streets or Wal-Mart parking lots.
Two years after I met them, I was back in Victoria, B.C. From the open patio door of our third-floor condo, I heard my wife chatting to a couple below. They had just bought their first home, a condo across the street from ours. After listening for a few seconds, it dawned on me. These were the people we had met on the Mexican beach. I raced downstairs to learn more of their story. Four and a half years. That was how long two professionals with decent incomes lived in a camper van to afford a down payment for a condo in one of Canada’s most expensive cities.
Rising home prices are a global problem.
Back in 1988, it was relatively easy to buy a home in the US for $85,000. That was, after all, the national median home price. If we index $85,000 to inflation, an $85,000 home in 1988 would be worth about $200,000 in 2022. But try finding a home in the US for $200,000 today. According to Trading Economics, the median single-family home in the United States is worth more than $375,000. And that price looks quaint in most American cities.
Sure, mortgage interest rates are still near historical lows. But that doesn’t make it easier for young people to scrape together money for a down payment on a mortgage. The chart below compares the Case-Shiller Home Price Index with median household income…proving it’s tougher than ever for people to afford a home. Median home prices, compared to median incomes, are even higher than they were in 2007 at the peak of the housing bubble.
First-time homebuyers can’t control home prices. The only option is to creatively stretch their money in ways that their parents and grandparents never had to. Some might draw inspiration from people like the couple I met who lived in a camper for four years. Others might rent a room in a home with other singles or couples to reduce rent. In some cases, two young families could even rent the same house. Others might choose to buy a Tiny Home.
This might sound crazy. But people are adaptable, resilient and fully capable of sacrificing when they need to. I’m not saying this is easy. It isn’t. But there is a silver lining. People typically feel great when they achieve something tough. That’s why people run marathons and suffer through cross fit workouts. It’s the feeling we get after pushing ourselves through initial discomfort. And at some point, as with the tough workout, we begin to enjoy the process as much as the reward.
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas
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