Even 'worse' is dual income, no kid families that are delaying and skipping child costs. Thus with "double" the cash flow and shared costs, couples afford higher prices at a lower cost.
So doubling of income tripled the amount that could be spent on housing.
But wait, there's more. People buy housing with debt, and a doubling of the monthly payment on a mortgage more than doubles the price that can be afforded. So that household paying $800/mo could move from their $195k house into a $600k house with a $2500/mo payment.
So, a doubling of income has the potential to increase the amount of house a household could afford by six. Granted, this ignores things like taxes, and most people don't spend their entire raise on housing. But this fact is probably what helped drive prices in places like California into the stratosphere.
The crux of the problem is probably that income follows a roughly pareto distribution. When housing is limited, the poorest households drop out of the market. And when populations grow but a town doesn't, housing gets bought by people higher up in the income distribution curve. And past median, incomes climb quickly.
If you have 30k houses, in a town with 60k people, then housing will be affordable to a median income. But if the population grows to 120k, but housing doesn't, then only the top 75% of households can afford a house. Median income, to top 75% is a huge jump.
Housing is a great way to establish a level of security for your family and kids; but there's a finite number of houses with proximity to good schools, jobs, and other necessary resources, and so families needed to dedicate larger and larger portions of their income to compete against other dual-income families that were bringing new money to the housing market.
If you have single income households, and all of a sudden everyone's a double income households, you're not any better off. You'll get inflation, especially in housing. People will point out that stay at home moms weren't THAT pervasive, even decades ago (not as pervasive as us younglins would think), and that may be correct, but double professionals as a common thing is still more recent. We're making some (slow) progress toward wage equity on top of all of it too. That's a good thing, but it doesn't change much when people are bidding against each other.
But all things are not equal: It's not as simple as "back then it was 1 income families against 1 income families and now its 2 vs 2".
Not at all! Now you have 1 income families, 2 income families, 2 income families with no kids, 2 income families where both are software engineers, etc. All of these always existed in some form, but now it's very visible.
If my partner and I (we're DINKs, both in software engineering and highly successful) go to bid on a home, and a single working parent with a partner who stay at home, and 3 kids, try to outbid us... Well, let's hope for them that the single earner is a world famous neurosurgeon, else they're not getting that home.
I live in a 2 income house with a kid, I'm not sure that the alternative (considering the economy as a whole and not just home prices) is actually preferable.
It's also probably pretty difficult to disentangle the effect on home prices from more women working from the effect on home prices from other things like low interest rates. There's likely not a single cause for this, but rather an outcome of some aggregate of causes. It's entirely possible that more women working does increase home prices some, but that it's only some fraction of the overall increase we've seen, and that families come out ahead on this economically by a wide margin. Especially taking into account the aggregate effect a larger labor force has on output and productivity.
I'd also not focus too much on the "women entering the work force", because that's only one part of it, and not even the biggest part. More families not having kids, fewer families supporting their parents, more complex family structures in general, etc all impact it.
I also don't think it has a significant impact on home price. After all, when accounting for inflation and interest rates, home price is not up by that much. Depending which periods you compare it to, it may even have gone down.
What it changes, is the dynamics of bidding wars in low supply areas, which is a lot more specific, and is generally what people talk about on social medias. The whole "Omg this home went 100k over asking!" shock factor. Again, adjusted home prices didn't go up that much at the median. It's specific homes in specific areas that are skyrocketing.
There's not many alternatives beyond increasing supply. I always like to contrast it with raising the level cap in an MMORPG. Everyone who quickly maxes their level after an update is back to square 1, all being the same. But the person who just started playing is at a huge disadvantage. It may be specific, but for readers familiar with Final Fantasy 14, if you start the game fresh today, you're in for hundreds of hours of catching up...It's very similar to the economic situation we're discussing.
You're thinking too short term. This logic does not work for more than one human generation.
Say you're playing Civilization. I give you a button in the "change civics" category. You click it, and two things happen:
1. You double the number of professionals in all cities, as a factor of your total population.
2. Your population growth rate goes from strongly positive to slightly negative.
Do you click the button?
Let's make the numbers easier: If you don't click the button, you have a 2x growth rate per generation, and if you do click the button you have a 1x growth rate, i.e. perfectly balanced replacement. Well when happens if you click the button? You get ahead for one generation. But your opponent catches up in the next generation. And in the generation after that, they have 4x the population and therefore 2x the professionals. Before long they're outproducing you on every dimension.
?? The growth in output would offset the increase in dollars bidding for the same goods - ie. more people working would mean more supply and also more $$ bidding for goods.
Seems absurd to say "you're not any better off."
People don't want "a home". They want THAT home (or at least, a home in THAT area). Yes, there are supply issues because of zoning and NIMBY policies, but even super dense areas like Manhattan have significant supply issues.
So you have income increases that can't be offset by the output, because supply is limited.
One way out of that is simply to increase the supply of desirable neighborhoods. The number of those are finite, but can be increased. The hard part is how to do it?
Sometimes I like to imagine there existing something like Kickstarter but for cities. You get a few thousand people that want to build a house but can't afford land, a handful of employers, and maybe a University that wants to establish a new branch and they pool their money and buy a couple square miles in the middle of nowhere. They divide it into lots and start building. Property values rise, and as that happens leftover lots get sold to finance construction of infrastructure, schools, fire departments, and so on.
This exists in a way. "Off the plan" apartment buildings are sold before the building is actually built. If enough people buy it, the construction goes ahead. If not, you get your money back.
E.g. it's a lot easier to have two working people in a couple make $300K total vs only one person making $300K. It would be interesting to go back in time and correlate the rise of dual working couples vs housing prices adjusted for other factors e.g. inflation
I'm a software engineer myself in one of the high paying tech hubs, and married the same. When we went to look for a home and toured open houses, all you saw were pairs of young couples wearing Google, Microsoft and Facebook swags. Sure, I didn't personally ask every single one of them where they worked, but I'd venture that a non-zero amount of these couples were "Tech DINKs", like us.
The average person simply can't compete with that. Add that in the urban areas these folks are less likely to want a big car, some may be happier playing Final Fantasy 14 during vacations than traveling across the world (I know plenty of travelers, but there's certainly a lot of "low cost" vacationers in the industry), and some level of financial literacy (common for people who get compensated with RSUs), and it's absolutely one sided.
With that said, median home prices have only increased a little faster than inflation. When you account for interest rates tanking + inflation, a median home in 2021 is the same price and sometimes cheaper than it was in 2005 (data for the last few months is harder to find, and there's been a unusual spike, so it may not be quite true right now, but it was just a few months ago).
The bigger problem is that everyone wants to live in the same place (usually in urban centers, where the jobs are, and where you don't have to drive an hour and a half to work). So prices where people want to be have increased higher than median.
I'd expect people are more ok with paying a larger portion of their income to live where they want to be. Even as extremely high earner DINKs, housing will eat up a good chunk of our cash flow if we feel like blowing it all to live in Manhattan in a condo that doesn't suck.
The bigger problem is that everyone wants to live in the same place (usually in urban centers, where the jobs are, and where you don't have to drive an hour and a half to work).
I'm hoping WFH greatly disrupts this, opening up rural areas to tech workers. It won't work for everybody, but it does work for SWEs and many kinds of technology employees and contractors.
It will make a difference, but it will be small. During that time, the rest of folks will still flok to cities.
As to financial literacy, books tend to make things much more complicated than they are, and will be too focused. For a beginner, there's a few things that matter.
First, the "flowchart". You can find a bunch of these online, but I like this one:
https://u.cubeupload.com/demonlesondledon/FIREFlowChart.png
This is so you don't fall in the trap of, let say, having a 5% investment while sitting on a 15% debt, or not use your employer 401k matching and invest the money somewhere worse.
Then there's basic investment strategies to get started. Bogglehead gets you pretty far there: https://www.bogleheads.org/wiki/Three-fund_portfolio
The next is understanding how the US market works. It averages 10% a year even if you include the great depression/recession and every other downturn. One day it could do like Japan and never recover/stay flat, but it has never happened in the US so far:
https://advisor.visualcapitalist.com/historical-stock-market...
Even for the great depression, while you'll hear that it took 25 years to recover, but that's based on the Nasdaq, which is a very small sample of stocks. The market in aggregate recovered much faster.
Finally, you want to understand all the variables when comparing cost/return of home ownership vs renting. It's a LOT more complex than people make it sound. The NYT has a calculator that shows it, alongside a paywalled article: https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
Bonus: a lot of it just comes down to internalizing the average market return and its risk, and comparing it against all the gains and leverage you can make in other ways. For example, with current interest rates, you probably want to pay your mortgage -as slowly as possible-, which is counterintuitive to most people.
https://www.pewresearch.org/ft_dual-income-households-1960-2...
Given that long-term unmarried couples are both increasing in number and (I believe) more likely to be dual income, this tells the opposite picture.