China and Mexico are beating America at creating the American Dream for the next generation — at least in one key measurement.
New statistics in a recent HSBC survey show millennials in both China and Mexico are much more likely to own homes than American millennials. In fact, Chinese millennials are twice as likely to own homes.
Among the nine countries polled, France also had a higher percentage of homeowners and Malaysia was tied with the United States. Let me repeat: America was tied with Malaysia. 35 percent of young Americans and young Malaysians (born between 1981 and 1998) own homes. 46 percent of Mexican millennials, 41 percent of French millennials, and 70 percent of Chinese millennials own homes.
For years, the American Dream has meant upward socioeconomic mobility, consisting of steady employment, home ownership, and a healthy family. Home ownership and the resulting economic stability from home equity are a vital aspect of the modern American Dream.
Yet, we’re getting beaten by China, Mexico, and France.
We should be happy for those countries, but we need to look within to see how our nation’s policies have failed our young people. Americans in previous generations and millennials in other countries could afford homes, yet today’s young Americans are struggling. Why?
The three biggest causes are housing affordability, high student debt, and lower economic opportunity. In short, housing costs have risen while median income has fallen. Where good millennial jobs exist, housing is shockingly expensive.
According to a recent ATTOM report, “Annual home price growth outpaced annual wage growth in 363 of 447 counties (81 percent) analyzed in the report.” And, this includes wage growth among all demographics, not just millennials.
Factor in Federal Reserve data showing that millennials are earning 20 percent less than baby boomers were earning at the same ages. Average wages have fallen since the recession, according to Census data.
Then, add student loan debt on top of that.
A recent Fitch Ratings press release summarized the data, saying, “Fitch’s comparison of cash flows for two hypothetical recent college graduates shows that a monthly student loan payment of $203/month, the 2016 median according to the Federal Reserve Bank of Cleveland, would result in $45,000 less in mortgage loan capacity. Over 40 million people now hold student loans.”
“The cost of higher education in the U.S. has grown at an average of 5.4% annually since 2000, more than double the 2.2% average annual consumer price inflation rate. As the number of graduates with student debt and the average debt burden have grown, stagnant wages have also crimped millennials’ ability to save for a down payment. During 2007-2015, average student loan balances for all borrowers surged 60%, compared with nominal wage growth for recent university graduates of just 13%,” the press release said.
To revive the American Dream, policymakers at all levels of government need to consider how government policies are driving up the costs of housing and higher education, as well as what policies governments can put in place to allow for more economic growth. I proposed some solutions in an op-ed last year, “Blame government, not millennials, for record number of young Americans living with their parents.”
Without addressing these three problems, the American Dream will continue to yield ground to the Chinese Dream and the Mexican Dream.