The United States was founded on the idea that inherited social and economic status should not define one’s destiny. This principle attracted immigrants fleeing predetermined futures. However, in many other continents, a person’s future is often tied to their ancestors due to centralized power and the self-serving agendas of elites. I suppose that’s what makes democracy and capitalism, core tenants of the so-called “American Dream,” so enticing for individuals looking to immigrate to the U.S.
Many experts have discussed reason why the American dream may be dying. A widening wealth gap, the escalating cost of education and health care, and the diminishing availability of well-paying jobs have all raised questions about the accessibility and viability of this dream for many Americans.
Is the American Dream Dead?
Notably, in a recent interview given by Redfin’s (NASDAQ:RDFN) CEO Glenn Kelman, an interesting point arguing that the American dream may in fact be dead, was brought up. Kelman posited that many younger Americans may simply not believe that a future as bright as that of their parents is possible. He said,
“The bigger implications are that so many people have stopped believing in the American dream. One in five millennials believe they will never own a home. And if you don’t have that conviction that you’re going to get your piece, it’s really hard to invest in the long term. It’s really hard to believe that society is going to work out for you. I think we have to come together as a society, build more houses and figure out a way that [the] next generation is going to be able to buy into our society.”
Thus, the American dream is called a “dream” because it’s about the visioning process for young folks and those looking to immigrate to this country. If people simply can’t envision a future where they get their piece, it may be over before it started.
Here are two reasons why I think Kelman is onto something.
Housing Is Going to Remain a Hot Button Issue
I have to agree with Kelman on his core premise. The idea that one-fifth of the U.S. population believes they’ll never be able to afford a home is worrisome. Much ado is made of the concept of affordable housing, particularly in high-cost coastal markets. However, this issue appears to be more wide-spread than even I thought. Rising home prices in many overlooked parts of the country are becoming a bigger issue. Pandemic-related shifts in where folks choose to live and inflationary pressures might be causing this. However, that doesn’t really matter. This is the new reality.
On that topic, it’s also true that while wages have risen, they’ve still done so at a lower rate than inflation. Thus, the pocketbooks of most middle-class Americans continue to get pinched. Until something changes, this housing and cost of living crisis is likely to continue to drive home a depressing reality for young people. The reality is that their quality of life may be worse than their parents.
Higher Cost of Living Driving a Debt Bubble
For many young or new Americans, this higher cost of living creates adverse effects. There’s obviously a lowering of expectations that comes along with seeing sticker prices for homes and automobiles where they are. That’s a key portion of the death of the American dream narrative that’s floating out there.
However, there’s also the debt side of the equation. Higher prices for assets (houses, cars and the like) as well as essential and discretionary goods and services mean consumers are forced with trade offs. For those just making ends meet, it’s a question of cutting back on spending, or taking on debt. For most, pulling out the credit card to pay for groceries is the necessary and only move. Thus, we’re seeing an explosion of consumer debt.
Indeed, American debt has surged, reaching $11.67 trillion, up 25% from pre-Covid levels. Despite inflation, the bigger concern is younger generations like millennials struggling to buy homes, with the median age of homebuyers now around 47. Additionally, the average American has only $5,300 in savings. This situation is likely to worsen.
Such factors have resulted in the fading of the “American Dream” and contributed to slowing social mobility. Many young people are now struggling to achieve the same standard of living as their parents, let alone surpass it.
What Happens Now?
In the face of evolving economic landscapes, shifting social dynamics and the challenges of the modern world, the concept of the American Dream has undoubtedly encountered significant hurdles. The ideal of upward mobility, the pursuit of happiness and the promise of a better future for all no longer seem as universally attainable as they once did.
It’s sad to think about the American dream being dead for so many individuals across the country. While that’s certainly the case for a specific portion of the public, I also think it’s important to think about what’s being done to maybe recreate a renaissance for dreamers moving forward. There will always be technological innovation and new opportunities that will arise as the economy involves. The hope is that more of these opportunities become available to a larger swath of people.
It’s a depressing idea to discuss, but one that is important for investors to think about. As Kelman said, if young folks don’t see a future for themselves, the same kind of long-term investments won’t get made. We’ll have to see how things play out, but it’s something to watch closer in the years to come.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
