The American Dream is Dead

Or at least it seems to be for many young people. I mean who can blame them? Living costs are at all time highs, wage growth does not keep pace with the cost of living, and owning a home seems unreachable.

Let’s do a bit of a math exercise. Now, while recent events may bring question to the Bureau of Labor Statistics, and I do have my own thoughts on this that I will relay in either a separate blog post or a podcast, I think the idea still holds. Take a look at the average sales price of houses sold in the United States in the first quarter of 1971, which was $27,300. I chose this data point because this is as far back as we have information on mortgage rates which I will discuss in the next paragraph. If you were to plug that amount into the Bureau of Labor Statistics Inflation Calculator, and adjust it to today’s dollars, as of June, 2025, the average house price should be $219,598.89. Compare that to the second quarter of 2025 where the average sales price of houses sold was $512,800, more than twice that amount. The math doesn’t fair any better with the median sales price of houses sold in the United States either which reflects similar numbers: $24,300 in the first quarter of 1971 adjusts to $195,467.14 compared to $410,800 in the second quarter of 2025.

Now, that’s just the price of the homes themselves, but let’s look at the means to pay for them. If we apply the same math to the average hourly earnings for April 1971 which was $3.58 we get an inflation-adjusted hourly wage rate of $28.80, lower than the current average hourly wages of $31.34 as of July 2025 which means that average hourly wages have actually gone a bit higher than inflation. However, when we look at the percentage that the payments of a 30-year mortgage is relative to income, we see a drastic difference. Take the hourly wage for April 1971, $3.58, and multiply it by 173.33 (this is 2,080 hours typically worked annually, divided by 12 months), you get monthly income of $620.53. Then, take the weekly average 30-year mortgage rate for the week ending on April 2nd, 1971 which is 7.33% and apply it to a loan amount of the average house price in 1971 of $27,300, and you would get a monthly payment of $187.72. Finally, divide the monthly payment by the monthly income, and we see that the mortgage was only 30% of monthly income in 1971. Now, if you were to do the same with todays’ numbers: $31.34/hour wages, $512,800 average home price, 6.63% weekly average 30-year mortgage rate for the week ending on August 7th, 2025, the mortgage payment of $3,285.21 is a whopping 60% of the $5,432.16 monthly income. With this in mind, I do want to point out that we are in a rather unique situation in which we have elevated interest rates and a shortage of housing supply that increases the cost of housing. If you purchased a home before the pandemic (fourth quarter of 2019) you would see: $23.84/hour wages, $384,600 average home price, 3.72% weekly average 30-year mortgage rate for the week ending on January 2nd, 2020, the mortgage payment of $1,774.60 is 43% of the $4,132.19 monthly income, which is still considerably high, but not that drastic. My point being here that we are in rather unfavorable economic cycle, and the feelings of exasperation are amplified by the economic reality that buying a home is not feasible, at least in a financially responsible way, and many see that, along with the other economic disadvantages, as a sign that the American Dream is dead.

And while I sometimes catch myself entering that same sentiment and others argue the American Dream never really existed, I remind myself that the American Dream is still very real for people looking for an opportunity for a better life. I talked about this in my post from a few years ago, and while the solution I offered then is simplistic and naive at best, it touches on the idea that people come to the United States for an opportunity. I see this play out in my own life through my parents. You see, both my parents came to America in search of the American Dream, and I would say, they have achieved it. My dad grew up in a poor village in Nayarit, Mexico and knew nothing but work. Hell, he didn’t get to attend grade school as he needed to work as a child to help provide for his family. Similarly, my mother grew up in a pueblo in Colima, Mexico, and while she had the luxury to attend school up until middle school, the prospect of wealth was not really feasible. And so, they both made their quest to the United States, and started a family in Santa Ana, California where they reside today. Over the years, they worked and were eventually able to purchase a home. They had three kids, two of which graduated from a 4-year university and are on with their careers, and their last one set to attend UCLA this fall. They have placed the foundation for the next generation to flourish and I think that is what they wanted.

I sincerely believe that the American Dream is still very much alive and that opportunity is still very much here. That is not to say that the United States does not have its fair share of problems, especially now with a rather despotic administration who is terrorizing the very fabric of what it means to be American. These harsh economic truths alongside public sentiment need to be taken seriously because it can quickly digress to a pessimism that blankets reality and can actually kill the American Dream.