The American Dream Deferred: High Costs and Low Mobility in Today's Economy

A lot of people are feeling stuck in what's being called the "trapped in place" economy.

by Faruk Imamovic
The American Dream Deferred: High Costs and Low Mobility in Today's Economy
© Getty Images/Spencer Platt

A lot of people are feeling stuck in what's being called the "trapped in place" economy. It's like being in a boat that's not moving; no matter how hard you paddle, you just can't seem to get ahead. Dreams of getting a new house, a nicer car, or landing a better job feel more and more like wishful thinking.

It's not just that these things are too expensive; it's that there's this whole mess of financial stress that makes it really hard to make any big changes, leaving a lot of us feeling pretty down about the future.

The High Cost of Aspiration

The aspiration for a better life is a fundamental human drive, one that shapes our goals and guides our decisions.

However, the journey towards achieving these dreams is fraught with obstacles, especially in today's economic landscape. "If you are trying to move, buy a car, whatnot, then you have all these bad buying conditions on top of everyday high prices, so it's a double whammy," explains Joanne Hsu, the director of consumer surveys at the University of Michigan.

Her words paint a stark picture of the dilemma facing many Americans: a battlefield of financial hurdles where the cost of ambition weighs heavy. For those looking to climb the property ladder or to upgrade their ride, the market conditions are less than favorable.

The housing market, in particular, showcases the dramatic shift from accessibility to exclusivity. Despite a slight dip from the peak prices of 2022, homes are still 47% more expensive than they were just four years ago. The dream of homeownership is further complicated by the daunting mortgage rates, now hovering around 7%, a stark increase from the roughly 2.5% rates seen in 2021.

This surge not only deters potential buyers but also discourages current homeowners from selling, given the likelihood of higher rates on a new mortgage. In a society that equates success with material acquisition, these economic barriers serve as a harsh reality check.

The aspiration for a better standard of living is being overshadowed by the grim reality of financial constraints, leading many to question the feasibility of their dreams. The dual challenge of high prices and unfavorable buying conditions has created a scenario where advancement feels like a luxury few can afford, encapsulating the essence of the "trapped in place" economy.

Markets Open© Getty Images/Spencer Platt

Housing Market

Owning a home is a big part of the American Dream for many people. It stands for having made it, for stability, and for having your own little corner of the world.

But lately, this dream is getting harder and harder to reach for a lot of folks. The housing market is tough, with prices still sky-high and not enough homes to go around. Even though prices have dropped a bit from their highest point in 2022, they're still a whopping 47% higher than they were back in 2019.

On top of that, the cost of borrowing money for a mortgage has shot up because the Federal Reserve raised interest rates to try and control inflation. This double whammy of high prices and high mortgage rates is making it really tough for people who want to buy a home.

Current homeowners, particularly those of the baby boomer generation, find themselves locked in by the golden handcuffs of low mortgage rates, reluctant to trade up or downsize due to the financial implications of securing a new mortgage at today's rates.

This whole situation is made even worse because there aren't enough new houses being built to meet everyone's needs. So, there are even fewer homes available for people who want to buy. While some folks were hoping for a big drop in prices—a housing market crash—that just hasn't happened.

It's like a lot of people are stuck waiting for a chance to get their dream home, but that dream keeps getting pushed further and further away.

The Auto Industry's Stalled Engine

Parallel to the housing market's trials, the auto industry presents its own set of obstacles for consumers dreaming of a new set of wheels.

The financial burden of purchasing a vehicle has intensified, with prices soaring and loan approvals becoming a Herculean task for many. For those fortunate enough to secure financing, the sting of elevated interest rates turns the dream of car ownership into a daunting financial commitment.

This is compounded by an unprecedented surge in car insurance costs, which have climbed by more than 20% over the past year, tightening the financial squeeze on car owners. The cumulative effect of these challenges has led to a significant shift in consumer behavior.

Dana Peterson, the chief economist at the Conference Board, notes a growing trend of deferred dreams, with more individuals postponing or abandoning their plans for home and car purchases in light of the economic hurdles.

This cautionary stance is underpinned by the hope that inflation and interest rates will eventually subside, making the path to ownership less arduous. However, this waiting game is a luxury not afforded to all, especially those for whom a car is not just a convenience but a necessity for daily life.

The labor market, too, reflects this theme of stasis. Despite the ostensible strength of the job market, the reality for many Americans is a landscape of limited opportunities and sluggish growth. Companies are hiring with caution, reflecting a hesitancy that belies the low unemployment rate.

This conservative approach to recruitment has shifted the balance of power, making it a challenging time for those seeking to leverage job changes for better prospects.