“Our story wasn’t unusual. Because the median house was within our financial reach, members of my generation were able to begin homeownership early in our careers and parlay the increased value of our dwellings into larger homes for growing families.” That’s William Galston, a “token” left-wing columnist at the Wall Street Journal’s editorial page.
Perhaps not asked enough by Galston is if he’s missing a much more bullish signal hidden in melancholy for the middle class. Specifically, Galston is blind to a much more enriching housing market signal: don’t own one.
At risk of talking our book, Jack Ryan and I made exactly this case in 2024 with Bringing Adam Smith Into the American Home. In it, we reminded readers that housing is consumption as opposed to investment, and costly consumption at that.
Galston observes in downcast fashion that over the past half century, “median home prices have risen more than tenfold,” thus young people lacking the ability to ease into housing the way that Galston and others did in the 1970s and 1980s. It all sounds so crisis-like and dire, but Galston isn’t telling the whole story.
For one, he’s not acknowledging just how much homeowners paid for housing maintenance over the past half century, not to mention various improvements that would almost certainly shrink the tenfold returns that he cites.
Galston also leaves out the personal tradeoffs that are too often unsung in homeownership. In his case he’s an economist, he used earnings from his profession to get into housing, but if Galston is like most of us, in purchasing a house he took over the expensive management of something about which he knew very little. It raises a basic question about how much personal time did Galston lose after buying something he likely didn’t understand, and how much did this lack of understanding cost him in paying once again for home maintenance?
Most of all, the economist in Galston glossed over an obvious economic tradeoff that arguably should have mugged him. While he lamented the rise of an upper middle class that has allegedly priced the typical would-be homeowner out of the housing market over the past 50 years, he forgot to mention that the stock market over the same timeframe rose over fiftyfold. Galston might agree that the two are in some ways related.
While the wealth gap surely soared over the last half century alongside a beautifully shrunken lifestyle gap between rich and poor (yes, the two are directly related), the range of ways for the typical American to build his or her wealth free of any maintenance costs and any worries (as Ken Fisher says, the stock market does your worrying for you) truly skyrocketed, thus leaving housing in the dust.
It speaks to what Galston is perhaps missing. In return for a tenfold median housing price increase that realistically wasn’t after maintenance, equity markets soared. Galston’s error was in focusing on one price to the exclusion of a much more important one.
As opposed to housing prices telling us to go even deeper into debt to own a house, perhaps they're much more optimistically telling us not to buy so that we can truly build our wealth by exposing our earnings to the most enterprising people on earth.
Of note, the wealth built in that same stock market is now finding its way into housing, including build-to-rent and buy-to-rent housing options created by the unequal on Wall Street. Combine a growing renting option with easy investment options, and the outlook for the middle class looks better and better all the time.
