Marketplace - Most young Americans are rent burdened

Episode Date: October 23, 2024

In 2022, over half of adult Gen Zers spent at least 30% of their income on rent. They’ve got it slightly better than millennials did 10 years prior, but not by much. In this episode, how being “rent burdened” could affect young people down the line. Plus: The Federal Reserve turns its attention to the job market, more stadiums introduce facial recognition software and fewer kids went straight from high school to college this year.

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what you need is a really good explainer. We got you covered. From American public media, This is Marketplace. In Los Angeles, I'm Kyle Rizdal. It is Wednesday today. This one is the 23rd of October. Good as always to have you along everybody. It is way too easy for people who spend way too much time on in or covering economic policy,

present company, unfortunately sometimes included. To forget that for regular people, people who don't live and breathe this stuff, it can all be a little opaque. Like, the Fed cut interest rates, fine. But what does that actually mean? So we called Marketplace's Mitchell Hartman the other day and said, hey, Mitchell, would you make it all make sense, please? The Federal Reserve has two basic goals, what's called its dual mandate, legislated by Congress,

to pursue stable prices and maximum employment. And it's mostly been questing after the first one, keeping interest rates high to bring inflation under control. But this summer, cracks started to appear in the second Fed mandate to make sure as many people as possible have jobs, says former Fed economist Claudia Somm, now at New Century Advisors. CLAUDIA SOMM, Former Federal Economic now at New Century Advisors. Unemployment started creeping up.

It started to get harder to find jobs. But what we've seen is just some reluctance to go out and hire new workers. And that's where the Fed starting to lower interest rates can help, making it cheaper for firms to borrow and invest in their businesses. For the Fed, by making that investment path less expensive, that could get an employer over the hump of saying, okay, well, go ahead and hire two more workers. But in real economic life, this is not instant cause and effect, from lower rates to more workers being hired.

What's on the menu for y'all today? I have two shredded chicken tacos. With the two tacos today, you get a free side of rice or beans. Porte No Tacorilla is a bright, bustling restaurant in Portland, Oregon, where patrons line up, sometimes out the front door, to order their food, tacos, rice bowls, Mexican soups and salads. Brian Steelman is the owner. We're sitting in his new glass-enclosed patio dining room, which took two and a half

years of planning, permitting and build out. It was quite expensive and we have taken loans to do it. So far, it's been worth it. Our October, since we've opened this, has been just skyrocketed. It's by far the busiest October we've ever had. Steelman says interest rates coming down will help him fund the renovation of his other taqueria in town. Plus...

We just recently expanded catering and we are actually looking for a third spot. Which could eventually lead him to hire more workers. There are sectors of the economy, like housing, where the Fed's cutting of short-term interest rates may have a quicker effect. Private homebuilders in particular are dependent on the cost and availability of builder and developer loans from local and community banks. Robert Dietz at the National Association of Homebuilders says those loans have been running around 12 to 14 percent.

He predicts they'll come down as low as 10 percent. Lower interest rates on those loans will mean an increase in housing supply. And more demand for construction workers. But now let's throw a little water on this rate cuts firing up the economy and job market narrative because after the Fed cut rates in September, we got a really good jobs report, adding 254,000 new jobs with the unemployment rate falling to 4.1%. And the consumer price index rose 2.4% year over year, more than economists expected. Banking analyst Chris Stanley at Moody's Analytics says it's now less likely the Fed will cut

rates again soon. Chris Stanley, Moody's Analytics, BNP, FED, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, CFO, says it's now less likely the Fed will cut rates again soon. Either no more rate cuts for the remainder of the year or a much slower path to some of those lower rates than was anticipated is really the smart way to play. Most analysts do anticipate rates will continue moving lower into 2025. And small and mid-sized businesses are waiting for that says Joe Galvin at peer advisory firm Vistage. It puts CEOs in a position to think about making investments and capturing an interest rate that's much better than what they're seeing today. To invest in new facilities, new equipment, automation. All

that new investment will eventually require new workers in construction, engineering, operations, sales. It's just gonna take a while I'm Mitchell Hartman for marketplace on Wall Street today a little grim actually bowing you've probably heard about they reported that 6.2 billion dollar quarterly hole this morning McDonald's they've got the food poisoning story Starbucks down most of the day before bouncing back technology forget about it you know what did go up though bond yields we've been telling you about that we will have the details when we do the numbers Here's an item from the world of higher education. This year, fewer kids went straight into college right out of high school.

The data out today comes from the National Student Clearinghouse Research Center. It says that while undergraduate enrollment is up overall this fall, the number of 18-year-olds enrolling as freshmen is down nearly 6% from last year. That decline in freshmen is especially notable at four-year schools, less so at community colleges. Marketplace's Stephanie Hughes looks at why more teenagers are deciding not to go back into the classroom. Stephanie Hughes This year, there were some extra high hurdles

in the college application process. One was the FAFSA. That's the form students have to fill out to learn how much financial aid they can get. This year's FAFSA was revised and released three months later than usual, says Katherine Brown with the National College Attainment Network. Katherine Brown, National College Attainment Network I think there were students who tried to get into the FAFSA, were unable to do so, ran up against technical problems and eventually just threw their hands up in frustration and said, I'm not doing this.

Lauren Henry And then decided to put off going to school altogether. The FAFSA delay also meant college's financial aid offers got to students later than usual. And Jennifer Jesse, a college consultant in the D.C. area, says that left kids with fewer options. Jennifer Jesse It's only until you get your financial aid letter that you realize, wait, there's not enough scholarships to cover the gap. LORI GAUDETTE Also, this is the first class applying to

college since the Supreme Court ended affirmative action. That means schools can no longer consider race. Doug Shapiro leads the research center at the National Student Clearinghouse. Doug Shapiro I think that may have discouraged some students from applying at all. Lauren Henry And the labor market is strong, which could be pulling some high school graduates towards jobs instead of classrooms. In addition, some 18-year-olds who might have been going to college this fall were derailed by the pandemic. That includes Stacey Burnett's son, whose school in Connecticut was remote for all of ninth grade and some of tenth.

He just fell into himself. Burnett says her son, who'd been on a college track, couldn't handle returning to school. So he finished remotely and graduated four months late. She says before the pandemic, he was dreaming of being a pharmacist, but now has trouble leaving the house. I don't think he's going to launch in his 20s. Burnett says he is considering getting certified as an electrician instead of going to college. But she says he's not ready yet. I'm Stephanie Hughes from Marketplace. Today's first housing data point comes to us from the National Association of Realtors,

which said this morning sales of existing homes were off last month, down a percent in September from August, off three and a half percent from a year ago. The formula, of course, you can probably guess, high and rising prices, lower but still high mortgage rates. The day's second housing data point comes from the rental market, Zillow to be specific, which reports that in the year 2022, 58% of people aged 18 to 25 in this economy were what's called rent burdened, defined as spending at least 30% of their pre-tax income on housing. That's better than millennials had it when they were in that same age bracket, but not by too much.

Twelve years ago, 60, 6-0 percent of young adults were rent burdened. Marketplace's Kelly Wells set about finding out just how far that burden extends. The weight of a rent burden might change a bit year to year, but the main culprit has been around for decades, says senior economist Kenny Lee of Zillow and Street Easy. The historical undersupply of rental housing is really the problem. Millennials had it worse because they came of age around the time of a housing market crash. Rent burdened young adults peaked in 2011, and everything was getting better until 2020 happened.

The surging renter demand since the pandemic really reversed this trend, which led to soaring rents and inventory shortages really making it difficult for local housing markets to catch up with this demand. Now, at the same time that was happening, household wealth was increasing, just not equally. John Campbell teaches financial accounting at the University of Georgia. He says there are two main ways to increase wealth. You're either a homeowner or you have money in the stock market. And if you're at this level of 18 to 25, you're neither of those things. Meanwhile, housing prices have just kept going up since 2022, which is as far as this study went.

I would guess if you went out to 24, it wouldn't be better. It would probably be worse. If you pay a lot in rent, you save less. Jordan Levine, chief economist at the California Association of Realtors, says if you save less... It prevents you from building up that down payment, getting into that first home, then that forever home or whatever. And the longer these young adults are renting and rent burdened, the wider the wealth gap becomes. Levine says the big fix is increasing the supply of starter homes. We just need to make sure that we're facilitating all of that amazing

growth with the right amount of housing. And he's feeling hopeful because at least now he says there's finally consensus in the industry that the way to build more home ownership is to build more homes. I'm Kaylee Wells for Marketplace. Coming up... This is the line I won't cross. I will not download this app. Sometimes you just gotta draw a line in the digital sand, you know?

First though, let's do the numbers. Well, here you go. Dow Industrial is off 409 points today, 1% 42,514. Nasdaq down 296 points, 1 and 6 tenths percent, 18,276. S&P 500 down 53 points, about 9 tenths percent, 57.97 there. We're from Kelly Wells, about half of young renters being what's called rent $1.5 billion in sales. That is a whole lot of soda pop. Shares down just over 2%. McDonald's is down about $1.5 billion. The company is down about $1.5 billion.

The company is down about $1.5 billion. The company is down about $1.5 billion. The company is down about $1.95 billion in sales. That is a whole lot of soda pop.

Shares down just over 2%. Today McDonald's, as I mentioned, off 5 and a 10% Boeing. Ticker symbol BA off 1.8%. You're listening to Marketplace. This podcast is supported by Fundrise. Buy low, sell high. It's easy to say, hard to do. For example, high interest rates are crushing the real estate market right now. Demand is dropping and prices are falling, even for many of the best assets. It's no wonder the Fundrise

flagship fund plans to go on a buying spree, expanding its billion-dollar real estate portfolio over the next few months. You can add the Fundrise flagship fund to your portfolio in just minutes, and with as little as $10 by visiting fundrise.com. That's fundrise.com. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Funds Prospectus at fundrise.com. This is a paid advertisement. Hey everyone, I'm Rima Grace, host of This Is Uncomfortable, a podcast from Marketplace about life and how money messes with it. It's hard to believe, but we are somehow in our 10th season of the show.

To celebrate, I sat down with the founding producer and we chatted about everything from the early days of the show and the terrible titles we almost named it to what we've learned making This Is Uncomfortable. You'll also hear our favorite money tips from expert guests and how the show has helped some listeners make dramatic changes in their lives. You can hear this special episode of This Is Uncomfortable wherever you get your podcasts. This is Marketplace. I'm Kai Rizdal. America's farmers are in a bad mood. The latest read on farmer sentiment from Purdue University out earlier this month showed the

people who grow our food and raise our livestock are the least happy they have been in eight years. Also, and related, more than half of the 70 agricultural economists surveyed by the University of Missouri and Farm Journal this month say the farm economy is in a recession. Another quarter of those economists say it's right on the brink. Marketplace's Savannah Moore has more on what's got them down, down on the farm. Right now, U.S. commodity crop farmers are pulling corn and wheat and soybeans out of the ground.

And Scott Gurlt, chief economist with the American Soybean Association, says even though fall harvests are looking pretty good, Gurlt says farmers are paying more for things like land, seeds, and fertilizer. Their debt-dependent businesses are burdened by still high interest rates. And commodity crop prices are down. Doug Johnson I think we're going to see a mix of farmers who are losing money this year. It's barely breaking even. Lauren Henry Behind those lower prices are record crop

yields in the US and around the world. Basically, says Doug Johnson, who heads up Johnson Ag Outlook, supply is out of sync with demand in ways the industry couldn't predict. If you have a job in the city, you have a paycheck, you get paid every two weeks, you know what your income is going to be. That's not the world of farming. But the other thing about farm finance is that it's cyclical. Farmers are just two years out from record high farm incomes. With a little bit more padding in their coffers. And Kristin Owen, an analyst at Oppenheimer, says there's a saying in the ag business. Low commodity prices solve low commodity prices. By creating new demand, for example, low corn prices could drive up ethanol production.

Still, Owen says producers are moving with caution. That's reflected in layoffs at equipment manufacturer John Deere. I think that there is a lot of uncertainty in the farm economy right now. Over what will be in the next farm bill and what happens with the election and trade policy in the coming months. I'm Savannah Maher for Marketplace. Weeks after Helene and Milton, thousands of people, tens of thousands probably, of people in North Carolina, Florida, Tennessee, and beyond are still deep in the cleanup and most of them probably just starting to think about rebuilding after all of that devastating flooding. Having your home or community flood gets very expensive very quickly and insurance payouts

and federal disaster relief can take a while to arrive. A nonprofit in New York City is piloting a community-based insurance program that's meant to act as a bridge for people while they wait. Rare though it is in the United States, this kind of insurance could serve as a model, as Marketplace's Samantha Fields reports. At the corner of 183rd Street and 90th Avenue in Hollis, Queens, there's a yellow diamond street sign with black letters, Road May Flood. It was installed after the remnants of Hurricane Ida dumped some nine inches of rain

on New York City in 2021 and caused major flooding. More than a dozen people died that night, most in basement apartments, including here on this block. Everything from my house and that house was down and got flooded. It was like a nightmare. George Lee is 72 and he's lived here since the mid-1960s when his parents bought the house. He says the block has always been prone to flooding. It's at the bottom of a hill. But in the past... It wasn't that bad. Okay? I have water in my basement, maybe up to my ankle and that's it.

Okay? But when we have Hurricane Ida, forget it. That night, the rain was so intense that Lee's entire basement flooded all the way to the first floor. Everything was destroyed. I had very valuable stuff in my basement. I had a whole comic collection that was gone. I had a whole record collection that was gone. In the weeks after the storm, Theodora Macris at the nonprofit Center for New York City

Neighborhoods says many who had flood damage learned their insurance wouldn't cover much, if anything. People didn't know where to turn to. Are there funds coming from the federal government? Where can we apply? People were able to apply for FEMA funding, but Macra says the application and process were confusing. And ultimately when they did get money, if they did get money, it didn't really cover the things that they were hoping for it to cover.

It also took a long time to arrive. Carolyn Kuski at the Environmental Defense Fund says people with low to moderate incomes often struggle after disasters to replace food, clothes and furniture or find a new place to stay. Watching that play out over and over again she started thinking, how can we get fast and flexible dollars to these households in need after a big flood event? The Center for New York City Neighborhoods, along with several public and private partners, is now piloting one idea as a possible answer to that question, a kind of community-based flood insurance. Basically, the Center, with outside financial support, has bought

something called a parametric flood insurance policy on behalf of city residents. It pays out when there's a qualifying storm, one that meets certain parameters set ahead of time. So think wind speeds exceed some threshold within so many miles of your home, you automatically get a set payout. Or in this case, if a certain amount of rain were to fall, the Center for New York City neighborhoods would get a lump sum insurance payout that they could then use to give emergency cash grants of

$5,000 to $15,000 to a limited number of people affected by the flooding. And the nice thing about parametric is that it's very fast because there's no loss adjustment. There's no waiting for someone from the insurance company to come inspect damage and decide how much they'll cover. The payout is automatic if the storm is bad enough. Theodora Macreus at the Center for New York City Neighborhoods says people could use these grants for whatever they need, to replace food or clothes, stay in a hotel temporarily, or rent a car. Theodora Macreus, Center for New York City Neighborhoods, I think what's really important about that is nobody knows a family's needs or an

individual's needs better than themselves, especially in the moments after a disaster where things are really crazy and chaotic and you need to have a little bit more flexibility. In the days immediately after Hurricane Ida flooded his home in Queens, New York, George Lee needed help pumping water out of his basement and cleaning it out. I had to hire three people to come to put everything in the garbage truck. I had so much stuff. And after the cleanup, there was so much to fix and replace. Windows, the boiler, computers. Even now, three years later, Lee says some of his basement walls

are still cracked from the water. I'm Samantha Fields for Marketplace. High tech has come to the world of sports, new sports stadiums and arenas, to be precise. Facial recognition technology, to be even more precise. It's already in place from New York's Citi Field to San Diego's Pechanga Arena. And now a new $2 billion arena here in Los Angeles is taking tech even further by combining it with a smartphone app. The Intuit Dome, home to the NBA's LA Clippers and a concert venue on the side, is betting people are okay with a little more data collection. KCW's Megan Jamerson went to find out.

In order to get inside the Intuit Dome for a concert or a game, fans have to first download an app. Austin Williams is here to see Usher perform. Yeah, I'm excited. I got last minute tickets. Williams opens the app to access his digital ticket. He also opts into using the venue's facial recognition system. Williams smiles a little self-consciously and then snaps a selfie. Great one. Once he's inside, the app knows all kinds of stuff about him.

It can tell if he gets out of his seat. It can see the photos he takes in the stadium. If he decides he wants a hot dog, the app is already connected to his credit card, so he can use his face to pay. Williams thinks it's convenient. I mean, there's definitely like pros and cons to it, right? But I do think it's a great breakthrough. What does the venue get out of it?

Aside from his photos, browsing activity and employment info? The Intuit Dome declined to give an interview, but in an email said it doesn't sell data to third parties. According to the privacy policy, it uses this personal information to provide services. And there are clear financial incentives for all of this data collection, says Larry Vincent. He's a marketing professor at University of Southern California. It's no longer just a faceless ticket. There are some benefits for concertgoers.

Shorter lines, less price gouging on tickets that are resold. But there's a creepy factor here too. At the Intuit Dome, the system can hear how loudly fans cheer. They might be rewarded for their enthusiasm with discounts on concessions, but some might find the eavesdropping invasive. So the marketers have to really think about, okay, I can do this. Should I do this? How do I do this so that people really welcome it rather than feeling like their personal space has been invaded when they didn't ask for it?

Privacy experts have a lot of concerns about all of this. All this personal data could leak. It can be shared with law enforcement. And studies show that facial recognition systems have a much higher error rate for darker skin tones than lighter ones. The threat to privacy, it creates this additional cost to what you're already paying. Emerald Say is a lawyer and fellow at the Center on Privacy and Technology at Georgetown. Say's big picture concern is that people are increasingly desensitized to this level of surveillance and data collection. Then it would get harder and harder to object when this technology is implemented in more serious contexts, such as when they're attached to essential services.

And for some would-be concert goers, this level of data collection is a deal breaker, like Wendy Anguiano. We can say, this is the line I won't cross. I will not download this app. I will not go to the Dome. She doesn't trust companies to keep her data safe or be honest about how they are using it. But plenty of other fans don't seem to mind. The Usher concert is sold out. The

Dome says up to 75% of patrons opt in to facial recognition, including Austin Williams, who has finished setting up the app and is ready to head into the venue. So it's going to be a new experience and we get to hear the sounds of Usher along with it. Williams walks through the line to use his face as his ticket. In Inglewood, California, I'm Megan Jamerson from Marketplace. This final note on the way out today, make of this what you will, the beige book came out today. That, of course, is the Federal Reserve's region-by-region anecdotal look at the state On the way out today, make of this what you will, the beige book came out today. That of course is the Federal Reserve's region by region anecdotal look at the state of this economy.

Tip of the hat, by the way, for this one, to our Friday regular Gina Smilich from the New York Times. Mentions of election uncertainty here in October 2024's beige book, 15. At this point in 2020, 7. In 2016, just 8. Our Media Production team includes Brian Ellison, Jake Cherry, Jessen Duller, Drew Johnstead, Gary O'Keefe, Charlton Thorpe, Juan Colorado, and Becca Weinman. Jeff Peters is the Manager of Media Production. And I'm Kyle Rizdall. We will see you tomorrow, everybody. This is APM.

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