James' World 2

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America’s roaring real estate boom is leaving millions of would-be homebuyers out in the cold. The problem is most severe in that corner of the market that once propelled the American dream: the small entry-level home.

“I would like to a have a space with a yard, like 900 square feet,” says Mat Pergens, 39, who repairs and installs garage doors in and around Reno, Nev. “Simple cabinets, simple countertops, Shag carpeting. I don’t care. I just want four walls and a roof that I can afford.”

But his aspiration for a modest starter home is completely out of reach. The country is nearly 4 million homes short of demand, according to the mortgage giant Freddie Mac.

Like many American cities, Reno is undergoing a homebuying frenzy, with rapidly escalating prices. Home values in Reno have gone up 27% in the past year. With an influx of affluent Silicon Valley workers driving the market, luxury is trumping affordability.

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Recently, I’ve been spending money like a robber baron’s wayward son. I’m buying flamboyant leather boots, limited-print-run poetry collections on thick paper, tiny statuettes from the local thrift store. My pent-up energy has been directly channeled into frivolity. If you’re selling me a drink with a wild garnish (ramps, sure!), I will order one for me and one for you! This is a marked change. I used to be a woman of simple tastes: a whiskey neat with lemon, literally zero statuettes.

It seems as if many of us experienced a tidal shift in how we think about spending during the pandemic. But as fun as it is to talk about what we are buying, I also wondered what people have decided to forego. Asking around, I found that even people who feel as spendy as I do have also isolated things they never want to buy ever again. The homesteaders gained skills they never knew they could possess: They could do their own spa treatments, they could make their own pickled delicacies. The aesthetes realized they’d rather have the weird, special, real thing and never settle for substitutes. And the previously buttoned-up discovered the deep pleasures in avoiding bras.

After talking to 12 people about their budget cuts, I saw that it wasn’t astringency or asceticism that changed them: It was making sure that what they were buying was as fun, comfortable, lively, and joyful as possible. The answers below might be about giving things up, but only in the name of pleasure.

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Photo-Illustration: by The Cut; Photos: Getty Images

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How do most of us learn how to use our money wisely and well? When we’re growing up, we’re given special instruction in important subjects — swimming, driving, sex — to arm us with info and keep us from harm.

Yet when it comes to managing our money — an activity that every one of us needs to do, every day — we receive surprisingly little preparation. We’re not taught much about it in school, because education systems leave it to us to learn from our families and friends. However, those people often don’t fill in the gaps because money can be such a loaded or taboo topic.

Natalie Torres-Haddad, who grew up in southern California, saw many people around her struggling with debt and financial instability. She was determined to be the exception, and she purchased her first rental property in her early 20s and earned an MPA in Finance & International Business. In the process, however, she became buried in debt. Only by teaching herself the basics of money — basics that she’d never learned — was she able to steady herself and her finances.

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Illustration by Priya Mistry.

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The median price of an American house has increased by 28 percent over the last two years, as pandemic-driven demand and long-term demographic changes send buyers into crazed bidding wars.

Might the fact that corporate investors snapped up 15 percent of U.S. homes for sale in the first quarter of this year have something to do with it? The Wall Street Journal reported in April that an investment firm won a bidding war to purchase an entire neighborhood worth of single-family homes in Conroe, Texas—part of a cycle of stories drumming up panic over Wall Street’s increasing stake in residential real estate. Then came the backlash, as cool-headed analysts reassured us that big investors like BlackRock remain insignificant players in the housing market compared with regular old American families.

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Site of the next bidding war Tierra Mallorca/Unsplash

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The parallels are hard to ignore: the record prices, the bidding wars, the subdivisions that fill up as soon as they’re built, the resourceful buyer who clinched a deal by dropping off cupcakes that matched the home’s interior paint colors. Today’s real estate market feels a lot like the bubble market circa 2006. “The numbers don’t make sense. How do you make a rational offer on a house when you have irrational people in the game?” asks James Carmer, a software engineer who’s toured more than 100 houses in Austin.

So are we staring at another housing bubble? One hopes not, because when the last one burst, it triggered a global financial crisis and what at the time was the deepest economic downturn since the Great Depression. For most Americans, a home is their most valuable asset—as well as the collateral for a pile of debt. If housing goes down, so does the economy. “Real estate is suddenly pretty bubbly in almost every interesting market in the world,” said bearish investor Jeremy Grantham at a recent Morningstar Inc. investment conference in Sydney. “Eventually there’ll be a day of reckoning.”

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Photo Illustration: 731: Photo: Getty Images

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Last week, ProPublica published an investigation about how venture capital billionaire Peter Thiel has managed to turn a $2,000 initial investment into a $5 billion fortune inside of a Roth IRA, a type of retirement account that allows money to grow tax-free, meaning he will never pay taxes on his investment gains. The tactic used by Thiel is upsetting to people who would like to see the ultra-wealthy meaningfully taxed. The article hit different for another subset of people, though: Thiel’s strategy is now the hottest advice in the personal finance world.

The personal finance online media ecosystem consists of a large set of bloggers, podcasters, YouTubers, and TikTokers who give people common-sense financial advice like “pay down debt,” “have an emergency fund,” and “invest money.” The hottest subset of personal finance influencers at the moment are those who are trying to help people achieve Financial Independence (FI), the point at which you can quit your job and live off your investment returns, money from rental properties, or other investments (this is also called FIRE—Financial Independence, Retire Early). 

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Where should you invest $1,000 right now?

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Image source: Getty Images.

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The price of gasoline today isn’t exceptional — well off the $3+ spikes seen in the early part of the 2010s. On the other hand, a gallon of regular gas is still significantly higher (when accounting for inflation) than where it was in the 1990s.

Don’t let a “well, it’s been worse” mentality blind you to the fact that filling the tank is taking money out of your wallet, money that could be spent on more fun stuff, or even invested.

When fuel prices spike, lots of tips and tricks to save on gas get trotted out. They’re not all worthy.

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Photos from Getty Images.

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