The housing market, for much of the 20th century, was the bedrock of the American Dream. Home ownership, and the financial stability it represents, was a sure path to middle-class prosperity.
That dream turned to a nightmare for many American families during the epic real estate bubble and subsequent bust in 2008-09. What’s more, in the near two decades that followed, federal monetary policies coupled with restrictive local development standards have huffed and puffed an even more perilous bubble than the last one.
Now the crumbling façade of American real estate and the associated economic squeeze has become too great to ignore. To understand why the real estate market is falling apart, you must look at who’s expected to buy the houses. The arithmetic simply doesn’t work.
We’ve reached the point where discretionary income, the money left over after you’ve paid for basic needs, has effectively vanished for much of the population. When 67 percent of Americans are living paycheck to paycheck, saving for a down payment is impossible.
Currently, about 72 percent of Americans are struggling to pay their monthly bills. We aren’t talking about luxury vacations or even unexpected medical expenses. We’re talking about keeping the lights on and the fridge full. When the buffer is gone, the entire economic engine stalls.
The lack of affordable housing has created a generational rift. Young workers find themselves trapped in a permanent renter class. They’re unable to build the equity that once anchored the nation’s middle class.
Right now, more than 75 percent of homes across the country are unaffordable for the typical household. Most Americans are effectively priced out of the housing market. And this number is climbing.
Between higher interest rates, relative to four years ago, and artificially inflated valuations, the entry-level home no longer exists.
The Mortgage Death Trap
The ladder of social mobility has been pulled up. Millions of Americans have been left behind. Shelter is no longer a basic path to financial stability, but an unreachable speculative asset.
What we are seeing is the rent servitude of a generation. If you can’t buy, you rent. If you rent, you can’t save to buy. It’s a closed loop that keeps equity in the hands of the few while the middle class are stuck paying for a roof they will never own.
The modern American household also operates in a fragile state. Most families require two incomes just to keep the mortgage current. This dual-income trap means there is zero margin for an unexpected job loss.
If even one spouse loses their job, which is becoming a looming threat as the labor market adjusts to the realities of AI, the house quickly turns from a burden to a liability. The timeline from missed paycheck to foreclosure notice is shorter than most people realize.
According to the Bureau of Labor Statistics, the labor market is strong. But the reality on the ground tells a different story. We are staring down a year where millions of jobs are projected to vanish.
Automation and AI are displacing white-collar jobs that used to be safe. There have been massive layoffs in technology, finance, and manufacturing. In previous downturns, there were usually sectors that could absorb the displaced. Today, every sector, except low-cost elder care jobs, is contracting simultaneously.
When the jobs go, the houses follow. A bank doesn’t care about your years of loyal service. When the 30-day clock on a missed payment starts ticking that’s all that matters.
Engineered Collapse
Despite what the data from the Bureau of Labor Statistics says, there’s mounting evidence that this isn’t just a run of the mill economic cycle. When you look at the speed of the decline and the specific targeting of the middle class, it appears to be something else entirely.
The middle class, specifically the segment that has historically held the most private property, is under attack. By squeezing the life out of the housing market, wealth is being funneled upward. When families lose their homes to foreclosure, they don’t just lose a roof, they lose their primary vehicle for intergenerational wealth.
The result is a civilization of serfs. We’re rapidly transitioning to a rentership society. If you don’t own property, you don’t have a stake in the future. You’re left out in the cold.
In 2008, the crash was about bad paper and subprime loans. Today, the crisis is about affordability and insolvency. House price inflation in the face of stagnating wages has become too much to overcome.
Moreover, as houses are lost en masse to the banks they aren’t being foreclosed on and put back on the market at a lower price. They’re being sold in bulk to hedge funds, who promptly jack up the rents. What this means is your neighborhood could soon be owned by a corporation that doesn’t have a face, let alone a soul.
The real estate market isn’t just cooling off. It’s being hollowed out. Between the loss of discretionary income, the instability of the job market, and the sheer impossibility of the two-income mortgage, the American middle class is standing on a trap door.
Yet the collapse isn’t coming. It has already begun. The question isn’t whether the market will survive, but who will be left owning anything when the dust settles.
Grinding the American Middle Class to Dust
For decades, the home was a forced savings account that allowed a mechanic or a teacher to retire with dignity. Today, that vehicle has been hijacked by institutional capital.
As the supply of affordable homes dwindles, we see the rise of the build-to-rent trend. This is where entire subdivisions are constructed not for families to buy, but for corporations to lease back to them in perpetuity.
This shift marks the transition from a stakeholder society to a subscription society consistent with the WEF diktat of, “you will own nothing and be happy.” Housing, the most basic of human needs, has become a subscription service.
Thus, the ability to accumulate private wealth through long-term home ownership has disappeared. As a renter, you are no longer building equity and wealth, you are funding a hedge fund’s quarterly dividends.
This exploitive model ensures that the fruits of one’s labor are siphoned away from the community and into the coffers of distant shareholders. As a result, the working class are left with nothing but receipts and a sense of perpetual instability. The economic ladder has been replaced by a treadmill to nowhere.
In addition, a society of renters is a society of transients that lack the long-term community ties that homeownership once encouraged. As the trap door swings open, the fall both destroys people’s finances and shatters the very concept of the neighborhood.
Community engagement and local pride disappear when the residents of a street have no permanent stake in its future. Vibrant towns turn into anonymous places for an increasingly displaced workforce. No one makes eye contact. No one cracks jokes. No one helps their elderly neighbor bring in the groceries.
The doors are closing on the era of American middle-class independence. The dream of home ownership is being replaced by the reality of permanent debt, and the bedrock of the American middle class is ground into dust.
[Editor’s note: Get a free copy of an important special report called, “Cash Machine – Why You Should Own this Mineral Royalty with a 12% Yield,” when you join the Economic Prism mailing list today. If you want a special trial deal to check out MN Gordon’s Wealth Prism Letter, you can grab that here.]
Sincerely,
MN Gordon
for Economic Prism
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