Apparently Most People are Homeless

This past Sunday, in the Real Estate and Rental supplement to my local newspaper, there was a brief front-page article reporting some findings from a recently announced report on housing and affordability. I couldn't find this particular article online, but here is the official press release that it was apparently drawn from, from the "Center for Housing Policy". It has the dire and chilling title: "HEALTH CARE WORKERS PRICED OUT OF HOMEOWNERSHIP IN MAJORITY OF U.S. METRO AREAS, NEW STUDY FINDS". See also the Paycheck to Paycheck database that the study is drawn from.

A more misleading press release I have not read in a long time. And the study it is touting isn't very good either. From the press release one would be led to conclude that 30%, 40%, or more of Americans are literally homeless -- living on the street. Let me explain...

I won't argue with the assumptions made: 10% downpayment for a 30-year mortgage, family won't spend more than 28% of income on mortgage/prop. tax/insurance, and the salary data they used was from Salary.com. One could quibble with any of this, but I won't because the problems I want to discuss are far bigger.

The press release talks of comparing average salaries for each occupation around the country, with median home values in the country. The median home is $248,000 they say. And on that basis, registered nurses ($58,640), police officers ($45,780), elementary teachers ($47,104), and many other folks cannot afford such a median home. That's because you'd need $84,957 a year to qualify for that $248,000 median home.

But this is comparing average salaries across the country with a median home for the whole country. Everyone knows that both home prices and salaries vary greatly from city to city, region to region. So it is really quite meaningless to speak of national averages and medians here and then make grand conclusions based on them. The Paycheck by Paycheck website linked above lets you compare with a metro area, and there both the salary and median home data are for that region. And indeed you find that individuals in those occupations cannot afford a median home in, say, San Francisco. Even though they get paid more than people in the same fields in say, Western NY, the home prices in SF are really high. So that is better data at least -- but the press release doesn't talk that way at all.

But of even more importance... this article makes several ridiculous hidden assumptions:

• Single income household. It only talks about a police officer not being able to afford to a median home. But what about a police officer married to an elementary school teacher? They then earn about $93,000 together, which is enough to buy that median home. Is it really that shocking to learn that a single person -- who isn't a doctor, lawyer, pro athlete, business executive, etc. -- cannot afford, on their own, to buy a $248,000 home? No, not at all. But how many single people are trying to buy such homes, on their own?
• A $248,000 home. That sounds pretty nice to me. My home is a 2-bedroom, and it is worth about half of that. So you can get very nice housing for much less than the median home price! And these occupations they are lamenting can't afford the median home can afford a home a like mine, no problem. And it would be ample space for a single person, which again is what they are talking about!
• Priced out of homeownership. That is in the title of the press release! But obviously the people talked about... even singles without roommates... are not priced out of home ownership... just priced out of median-home ownership, meaning a home worth $248,000.
• The Big Assumption. The big assumption, implicit in the statements and tone, of this study and press release, is the following: police officers and elementary school teachers, who earn the average salary for their occupations only, and who are not married and do not have roommates, somehow should be able to have a median priced home ($248,000 home ... how many bedrooms is that for one person?!). The market isn't providing this to them, so something is wrong with the market and it needs to be fixed. These people deserve such a nice home, all for themselves. It is "disturbing" that often they cannot afford them.

The press release goes farther than just talking about homes. It also notes that nursing aides can't even afford to rent a typical one-bedroom apartment in 80 of the 210 metro areas or a typical two bedroom apartment in the 147 of the areas. Even assuming they are talking about rental costs that are relative to the person's geographic area (which the website does), much of my above points are still valid. These are single people -- not couples with two incomes, and not single people who have roommates. Nursing aides, who apparently earn barely more than janitors, who don't have roommates and aren't married... turns out they cannot afford the median apartment rent. But no where in this report do we learn what level of apartment they can afford. How far off from the median or typical apartment? An apartment that is still an acceptable living space? Again, such people are not homeless -- but you might think that if you read this article, of you might become scared to think that they will someday be entirely priced out of any home or rental possibilities.

What can be concluded from this superficial data that they have collected is the following: working, single people, who don't have roommates, often cannot afford the median home (or in some low-end cases, in some expensive cities, even rental apartments). But this just means they'll have to live, for now at least, in below-median accomodations. This means below $248,000 for homes. So what is at all surprising about this? Let alone "disturbing" as the press release states?!! Did we really need a study to tell us any of this? And does it really need the hyperbole and sensational headlines this press release is giving it? Beyond calling this news "disturbing", my local paper's headline was "Even apartments are out of reach for some workers", but the press release headline quoted above is much worse -- because it implies police officers and teachers, even single ones, cannot afford any homes at all.