It is Time to Rethink the American Dream

If you, like me, are a Baby Boom child, then you recognize Donna Reed.  She was welcomed into our homes on a weekly basis from 1958 until 1966.  Her presence is an important vestige from the ethic of our past and still influences our life today.  If you are not a Boomer, then it is critical to understand the lingering burdens from my era.  It is time to recognize that the influences from that era must be cast off if we are to come to grips with our growing and durable housing crisis!

The Donna Reed Show was a widely watched, successful TV series.  It was about a stay at home Mom, played by Donna Reed, that always looked beautiful as she sent her two children off to school each day and her pediatrician husband off to work.

They all lived in a nice house in the suburbs that was behind a white picket fence.  That house came to represent what has been labeled as The American Dream; the nice house in the suburbs that we can all go home to at the end of a hectic day.

That ​house was imprinted on our collective memories.  Not only was that house used to represent the ideal defined by The Donna Reed Show, but it was also used to represent the entertaining family in the suburbs that we met on the Dennis the Menace Show (1959-1963).  If that repetitive emphasis were not influential enough, we got to see that house as the foundation of the I Dream of Jeannie series (1965-1970).

So, over a 12-year period, the idea of what we should endeavor to be as individuals were fed to us through this house.  Those halcyon days from our past served as an important foundation for the type and location of housing that defines who we are at present.

Is That the American Dream Today?

I will not explore all of my evidence to support my answer in this post.  I promise that I will provide some evidence in future posts.  For this post, my answer is an adamant NO.

So much of our housing philosophy is based on the reality that was captured in those shows which aired immediately after the end of the Second World War.  We have a deep body of zoning that is in place based upon the aspirations of that era and our reactions to that.

The city planning that grew out of that era is now deeply embedded in the infrastructure for housing that we must evolve with into our future in spite of the changes that are affecting our present desires.

Some of the vestiges that we continue to live with include:

• Suburban sprawl,
• Dependence on cars to get most everything done,
• Congested highways that are in gridlock much of the time, particularly when people must get to and from their places of employment,
• Green spaces paved over to provide shopping and entertainment, and
• The list goes on!

Photo by Tim Gouw on Unsplash

This picture does not shock anyone and stimulates the very negative reaction that most of us feel to our housing choices.  It clearly does not help to define what we would like to believe is our American Dream.  Look closely and you will recognize that this picture includes every type of housing that we can choose to refer to as Home (single-family, multi-family, etc.).

Is This All That Has Gone Wrong?

This runaway pursuit of fulfilling our housing desires based upon the Post War reality that served as our foundation for what we have at present has run headlong into another, even more frightening, reality: housing affordability.

I addressed this immense challenge in one of my earlier posts.  As I discussed the price of housing, both rental and owner-occupied, is now at a place that makes the Donna Reed age impossible to imagine today.

Home Prices

The following graph, produced by the Federal Reserve relying on data from the US Census Bureau, can make this clearer:

This graph contains the median sales price of homes that were sold in the United States from the First Quarter of 1963 through to the first quarter of 2018.  This is an appropriate date range since it measures the prices from the end of what I will call the Donna Reed era through to the present time.

The graph is difficult to read in this post, so I will provide the key information that we need to evaluate to make sense out of what is happening to make the American Dream impossible to sustain.

The median sales price of a home sold during the first quarter of 1963 was $17,800.  The median sales price of a home sold during the first quarter of 2018 was $328,000.  That represents a 1,743% increase!

Harsh Reality

What really matters is how this has affected our ability to buy into the American Dream today, as compared to 1963, when it seemed reachable.

The family that was earning the Median Household Income in 1963 was able to buy the home that was also at a median price for only 2.85 x their annual income.

That same family today needs to spend 5.69 x their income to obtain the median-priced home.

This represents a doubling of the financial burden that they must face to get a similar outcome!

Other Relative Realities

It is valuable to examine what other relative changes have affected the quality of life possible in 1963 when compared to today.  Fortunately, American Advisors Group has provided the data that we can use to open this time machine.

Staples

It turns out the 1963 household spent an average of $0.32 per gallon of gas, while our current household needs to spend an average of $3.20 for the same product.  This appears to be a significant increase, but compared to their median household income both only spend 0.005% for each gallon of gas.  Indeed, given the greater fuel efficiency of our current transportation, this represents a savings.

This reduction in relative price is true, as well, for food.  The 1963 average price of a gallon of milk was $1.04.  Today that milk cost an average of $3.49.  The comparative price changed from 0.0166% of the median household income to 0.0061%.  A substantial reduction of over 63%.

That reduction was also true for another household staple, a dozen eggs.  In 1963 that household needed to pay an average of $0.55 for that dozen eggs.  Today, that average price has gone up to $2.00.  Relatively, however, the price has moved down from 0.0088% to 0.0035%, another reduction of more than 60%.

Entertainment

It turns out that this relative trend applies, as well, to entertainment, if it is defined by going off to the movies.  The 1963 household paid an average of just $0.85 to get a ticket to a movie.  Today that household pays an average of $8.05 to get that ticket.

While this seems like a substantial increase in price, the relative cost is identical; 0.014% of that median household’s income.

The technical improvement in movies has been achieved while keeping the relative cost the same.

College Education

This improvement in the financial burden that took place between 1963 and 2018 seemed to be limited to the staples and entertainment costs.  The same could not be said for the relative cost of 1 year of college tuition.

The 1963 household had to pay an average of $1,450 to obtain 1 year of college tuition.  The average for a single year of tuition in 2018 is a staggering $22,261.

More challenging was the change in the relative costs for those two households.  The 1963 household had to commit to allocating 23.2% of their median annual income to providing that education.  That relative burden has gone up to 38.64% for the 2018 household.  That is a relative increase of over 66%

Preliminary Conclusion

I am not describing this as a Conclusion, simply because I believe that it is more important to provide constructive insights when writing a Conclusion.  This is only my first step towards the goal of working with you to make a meaningful and lasting change in our quality of life by improving our housing choices and experiences.

Please let me know what you believe, but I have concluded that we have undermined our ability to have aspirational goals that are both attainable and sensible.

I do not regard it as sensible to force the housing choices we have available to be so unaffordable as to cause us to sacrifice our quality of life just to be able to attain the kind of housing that we truly desire.  Higher Education, another aspirational goal from our past and embedded in the American Dream, has done the same thing.  Both force us to devote more resources to it than is sensible.

I am passionate about seeing this change. I believe that our desires have evolved since Donna Reed influenced my generation, and I intend to actively pursue some clarity to what they have become on this website.  I believe that our policymakers and product providers are driven by the paradigms that I was able to contemplate, but are no longer reasonable today.

I believe that the residual influence of this old American Dream has forced us to pursue what is becoming the American Nightmare.

Please let me know if you agree.