Gen X, Y & Z can't afford a home so they spend elsewhere.

Attn young Spritzler readers. The reason you can't afford a home is largely because inflation and interest rates are on a tear. Have you wondered why? Just bad luck, the Easter Bunny, Lord Voldemort visiting your town?

It might have something to do with your gov spending money like it's water, borrowing up the tuchus which devalues our currency. Ergo causes inflation and high interest rates. So continue clapping loudly every time the Federales announce their spending more of "your" money to fix something that doesn't need repair.

Ooops...I forgot you haven't figured out that it's "your" money. Right, you never heard the Gipper speak.

Buying a House Isn’t Happening, So They’re Spending and Saving Differently

With interest rates and prices high, Americans are postponing their home searches by years, not months

By Rachel Wolfe, WSJ

Updated Nov. 10, 2023 9:45 am ET

Would-be home buyers are giving up on the housing market and finding other ways to use the money they had been saving.

With mortgage rates near 8% and average home prices hitting record highs, sales of existing homes were down 15.4% year-over-year in September, according to the National Association of Realtors.

Those thwarted by one of the worst-ever times to buy instead of rent are deferring their first house hunts not just for a few months, but for years. Others locked into low mortgages are realizing they’re stuck in their starter homes indefinitely.

Some of these people are putting money that would have gone into a home into their relatives’ futures. There was a 15% increase in the number of new 529 college savings accounts opened in the third quarter from a year ago, according to data firm ISS Market Intelligence.

Others are taking more expensive vacations and shelling out for extensive renovations and decorations for their current spaces. Homeowners spent $489 billion on improvements and repairs over the 12 months ending in September, according to Harvard University’s Joint Center for Housing Studies, a 5.4% gain over the previous period on top of a 17% gain the year before.

These consumers are helping fuel a spate of increased spending in the U.S. that has confounded economists who were predicting a recession less than a year ago.

“People are taking their frustrations out by using that money on vacations and enjoying life,” says Jamie Battmer, the chief investment officer at wealth-management firm Creative Planning. Unlike the equity they could build through a mortgage, “that money is gone and it’s never coming back,” Battmer says.

Beth Michalec thought moving back in with her parents in 2020 would enable her to put the thousands she saved on rent toward a down payment on a first home. She’s still renting.

“What would have been a sizable amount down in 2020 or 2021 now barely put the smallest dent on anything that one might consider decent,” the 41-year-old Michalec says of her search.

Michalec, who works in higher education, recently sat down with a financial planner to map out what retirement could look like while renting instead of owning a home. In the meantime, she’s investing more in what she finds meaningful, including a $2,000 trip to see Dolly Parton perform and contributions to college savings accounts for her two young nephews.

“You hear all about the value of property ownership, but that’s out of reach,” Michalec says.

Belonging

Katie Burke, a consumer behavior researcher at Accenture, says the unaffordability of the housing market is leading people to readjust their definitions of success.

“We used to be able to work for a few years, save for a home and get our independence,” Burke says. “That mental model is shifting.”

Karen Lindsey, 50, would know. She got married in her early 30s and bought a four-bedroom home with her then husband. Over the next 20 years, she got divorced, sold the home, went back to school to become an assistant professor at Elon University, and got stuck renting.

Lindsey says her only regret is that homeownership no longer feels possible as she gets closer to retirement. She has dipped into her down payment fund repeatedly in recent years, first to finance a move to Burlington, N.C., for her job, and then to help pay off credit-card debt and cover restarted student loan payments.

“By your 40s or 50s, you’re supposed to own a home, and I’m not there. So have I failed?” says Lindsey.

A market out of whack

The price of housing ordinarily goes down when mortgage rates increase, says Marco Giacoletti, a housing studies professor at the University of Southern California’s Marshall School of Business. That hasn’t happened.

The average monthly new-mortgage payment is now 52% higher than the average apartment rent, according to an analysis by commercial real-estate investor CBRE. That’s worse than the lead-up to the 2008 housing market crash, when the premium peaked at 33%.

Though houses don’t always shoot up in value over time, homeownership is a way of putting people on firmer financial footing over the long term. “We’re eliminating one of the key savings vessels for a much wider swath of the population,” Creative Planning’s Battmer says.

Kevin and Emilee Hurtarte expected to spend the year after getting married this spring searching for a home of their own. After calculating that their $2,500 monthly rent in Rockville, Md., would translate to paying over $3,500 a month on a 30-year mortgage, the couple delayed their search.

“We started crunching the numbers and math doesn’t lie,” says Kevin, a 29-year-old architectural designer.

The Hurtartes have dipped into their new-house fund to pay for an upcoming road trip out West and to splurge a bit more than they planned on their honeymoon.

“We feel like we have all this money and have nothing to do with it,” Emilee says.

Stuck in a starter

If Andria and Brad Rosell knew when they bought their Raleigh, N.C., home in 2017 that they would still be living there now, they would have chosen differently.

“It’s not a dream house,” says Andria Rosell, a public relations consultant.

Still, they feel lucky to have it, especially after Brad recently got laid off. The three-bedroom they paid $285,000 for has almost doubled in value.

After an unsuccessful hunt for a bigger house, they decided to spend around $50,000 renovating their property, including $10,000 on a new bathroom, $30,000 to update the kitchen and a few hundred to repurpose the playroom into a lounge space better suited to teens.

“We finally accepted that it’s not going to be a year where the market is like this, it’s going to be years,” Andria says.

Write to Rachel Wolfe at rachel.wolfe@wsj.com