Ramit Sethi: This Is the No. 1 Money Issue the Next President Needs To Address
Written by
Chris Ozarowski
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Amber Barkley
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In a recent interview with Politico, Ramit Sethi, host of the Netflix show “How to Get Rich,” shared his thoughts on what he believes should be the No. 1 priority for the next president: addressing the housing crisis.
Sethi believes housing is the most pressing economic issue facing Americans today — especially the younger generations, including Gen Z and millennials. Because of this, he believes President Joe Biden and former President Donald Trump’s positions on housing could sway voters one way or the other.
Why Sethi Believes the President Should Focus on Housing
Housing affordability has increasingly become a pain point for Americans, particularly for the younger population, who find themselves priced out of homeownership or burdened by high rent.
Sethi pointed out that housing costs are not just high because of lifestyle choices, such as spending habits and “too many avocados,” but due to deep-rooted structural issues within the economy. These include zoning laws, lack of supply and increased bureaucratic hurdles that slow down the development of new housing.
Sethi argued that the next president needs to make housing a central issue because of its immediate impact on the cost of living. It’s also a foundational element that affects other aspects of life, including job opportunities, family planning and general economic well-being. His solution is to focus on the immediate mass construction of new housing to match demand and stabilize prices.
Why Housing Matters for Voters
Since the late 20th century, the cost of purchasing a home in the U.S. has increased dramatically. According to data from the Department of Housing and Urban Development, the median home price in 1980 was about $64,600, which adjusted for inflation would be $256,089 today. As of the first quarter of 2024, the median home price had escalated to approximately $420,800 — an increase of over 60% from 1980.
To make matters worse, income has not kept pace with inflation. The median household income in 1980 was $21,020, which would be $83,328 in 2024 after accounting for inflation. As of the latest census data, the median household income in 2022 was $74,580, which would be $83,175 in 2024. This means that the real purchasing power of the median American household has actually decreased slightly, while the real price of housing has increased significantly.
Down Payments
According to a 2023 Redfin survey, for many young people today, one of the biggest hurdles to home ownership is the initial financial barrier: the down payment.
A down payment on a house typically ranges from 6% to 20% of the home’s purchase price, depending on the type of mortgage you qualify for. In cities with high real estate prices, even the lower end of this range can translate into a significant amount of money. For example, a 6% down payment on a $400,000 home is $24,000 — a substantial sum, particularly for those who are early in their careers or burdened with other financial obligations, like student loans or car payments.
Long-Term Financial Effects of Renting vs. Buying
Being forced to rent because you cannot buy a home can have long-term financial effects. The most notable one is that when you buy a home, every monthly payment goes toward building your equity.
When you rent, you pay money every month to live in a house or apartment that you do not own — even though you are paying a lot over the years, you won’t own the property at the end of your lease. In fact, the money you are paying every month may be covering your landlord’s mortgage. When the house is paid off, your landlord will be able to sell it and profit, while you can never recover the money you spent.
Another of the financial effects of renting is that your monthly payments can increase over time. Landlords may raise the rent when a lease is renewed, and over time these increases can be significant, depending on where you live and the rental market conditions.
If you have a fixed 30-year mortgage, your payment will usually stay the same every month for the next 30 years. In contrast, the average rent in the U.S. over the past 30 years has gone up from $447 in 1990 to $1,517 in 2024.
If you can buy a home, your monthly payments will remain steady, and money that would have been otherwise spent on rising rent costs could be invested into a retirement account for the future.
How Did We Get Here?
Several factors have contributed to this steep rise in housing prices. In many parts of the U.S., especially in urban and suburban areas, there has been a significant mismatch between the supply of available homes and the demand. The number of homes available for sale seems to be on a general downward trend over the past five years.
Real estate has also become a popular investment and speculative asset, pushing prices upward as investors buy homes to rent out or flip. This includes lower-cost homes, which in the past may have been bought by younger households as starter homes.
According to data from Redfin, real estate investors bought 26.1% of low-priced U.S. homes that sold in the fourth quarter of 2023. This is the highest percentage on record. This increase is also not limited to low-cost homes — the share of all houses owned by investors and not as a primary residence has been growing steadily over the past decades.
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