So there has been a little tempest in flying around the internets where a silly Australian millionaire/billionaire/gillionaire named something said something stupid, blaming Millennials’ lack of self-discipline and frugality for their difficulty getting into the home ownership market. Here’s a quote from the LA Times:
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” real estate mogul Tim Gurner said on the Australian version of “60 Minutes.”
The results on Twitter are predictably funny and bitter, and there have been quite a few stories, like the one shared from the Times above, that talk about the barriers to home ownership and the challenges that Millenials face in trying to buy a home, including staggering levels of student loan debt, stricter financial rules that require 20 percent down, the difficulty of amassing that kind of money when house prices are what they are, and job scarcity among Millenials. It’s shocking that that three-year, unpaid internship doesn’t get you all the money you need to put 20 percent down on a $350,000 home.
My little addition here is simply to note that $4 coffees are $4 coffees and smashed avocado is $19 in some of these restaurants for the same reason that housing prices are obscene: land prices. Yes, restaurants have a high mark-up on vegetarian options like avocado toast, but very little is priced at cost in restaurants: most deserts don’t pay for themselves, for example, but are kept on the menu to compete with other establishments*, and booze gets the biggest margin.
But everything gets more expensive when land prices get high. Land prices factor into everything in cities, from the wages you have to pay to keep wait staff slinging $4 coffees and $19 avocado toasts to the floor space you have to rent or buy to store and serve the coffee and toast in. Everything, from buying gas to boxes of cereal to eat at home rather than going out to eat, costs more at the same time that housing costs more. So while we can blame people’s consumption patterns (if we want to be jerks)–going out is more expensive–food consumed at home is going to be more expensive in cities, and punishingly expensive in cities where land prices are high, too.
Oh, and the home garden you might have to defray costs carries a $325 opportunity cost per square foot.
Now I want avocado toast.
I do think people are somewhat wrong to get too shirty pointing out that at least some Boomer wealth will be inherited into Gen X. When that happens, to how many that will make a meaningful difference, or whether it will happen in such a way to be useful to them as homebuyers are separate questions, but wealth doesn’t vanish and intergenerational transfers are real and important.
Here’s some funny Millennial tweets to make you smile. The kids are all right.
* California restaurants are dead unimaginative when it comes to desserts, and I suspect it has to do with everybody’s carb phobia. Thus most won’t shell out for a desert chef. Everything, everything on the menu is dead simple: ice creams or gelatos (machine made, put enough fat content into it and derive a clever flavor), bread pudding (recycle stale bread and a four year-old could make it), pudding (a 10 year-old could make that) and you’ve pretty much exhausted the lot.