When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each.
–THIS GUY*, Australian Real Estate Mogul
We are on the precipice of a full-scale war. The skirmishes are already under way at blogs, tweets, instagrammies, and facebook posts around the globe. While the world may be going to hell in a handbasket for other reasons, humanity is in high dudgeon over avocado toast. I might as well as join the party.
The instigator was THIS GUY (*who I refuse to name; you can google it if you want to give him the publicity) with his comment targeting the group we all love to bash, the Millennials. This 35 year old real estate mogul from Melbourne targeted Millennials on the Australian 60 Minutes by focusing on their passion for the luxuries of Avocado Toast, lamenting how it prevents them from properly purchasing a white picket fence house in the suburbs and having the 2.3 children that has been mythically dictated to be required for a good life.
Such comments raise so many questions. What is the price of avocados and, moreover, of avocado toast? What is the price of a house, and how does it compare to toast? Are millennials buying houses and, if not, why not? Who is THIS GUY? And, anyway, who asked him?
The Price of Avocados
Avocados as a commodity are subject to sharp price increases and decreases as well as huge variability depending on where you live. In the US, a single avocado can range in price from $3 in New York to $1.50 in San Francisco. Where I live, near the California farm basket to the world, we can buy a bag of avocados at five for $4.00 and that price has been steady for years, though slightly higher during last year’s severe drought. In Australia, avocados now run from $2-$3 although they also were priced at $6-$7 last year due to our drought and increasing demand worldwide, especially from China. So, if you’re pricing out the cost of an avocado, it can be anywhere from $.80 to $7.00, a pretty huge range.
By the way, those from Down Under really love their avocados. The highest per capita consumers of avocados are small population countries which grow avocados like Chile and Israel. But Australia is actually higher (2.7 kg) in per capita avocado consumption than the U.S. (2.2 kg). New Zealand – which I’m very well aware, thank you kiwi friends, is not Australia – ranks right behind the U.S. (1.9 kg). I do recall when those New Zealand friends were visiting they helped us plow through those bags of avocados with considerable daily gusto! So part of this obsession with avocado-eating may have more to do with Australia than with the trendy fruit.
The Price of Avocado Toast
In all cases, though, those prices don’t approach the cost of restaurant-made avocado toast. Let’s say home-made avocado toast with beets or cucumbers, hipster style, might be managed for $5 on the high end. In New York City, San Francisco, or Melbourne, any kind of breakfast you make at home would be double or triple that price in a restaurant. A new avocado bar recently opened in NYC and garnered a lot of press for both its unique nature and high prices. Toast at Avocaderia, which has gained positive reviews for the taste of its food, runs from $5 to $10 depending on whether it’s plain or has smoked salmon. (And when doesn’t smoked salmon cost $5 on toast? Maybe when it’s in Ireland….)
All in all, I was still hard pressed to find – even in the most trendy upscale brand new downtown New York City restaurant – toast that costs $19. I’m sure you can find it at the Ritz-Carlton. Is that what we’re talking about, all those Millennials eating breakfast every day at the Ritz-Carlton? Are we talking about the Khardashians here? I myself would be happy to get on board bashing people who eat breakfast every day at the Ritz-Carlton, but I suspect that doesn’t count as the “general public” or all Millennials.
The Prices of Housing
But let’s keep doing the math. Some tweets in response to the 60 Minutes comment suggested, for example, that it might take 642 years to pay for a house in Los Angeles. Is that correct? The price of housing – like avocados – also varies widely. From the nar.realtor.com website, here are some comparative prices for single family homes. The median single-family home in the US as a whole is $232,000 but that could be $118k in Akron or $183k in Birmingham or $207k in Boise. Those are locations on the cheaper side. I suspect you wouldn’t find any avocado toast there.
Housing prices where avocado toast rules would be places like Boston at $414k or Portland at $359k. If you really want to get comparable, you’d look at prices in San Francisco/Oakland at $815k or Manhattan where it’s so expensive you need to give a blood sample to get a price which would also include your first born male child. Whether housing is remotely affordable does depend on where you’re talking about. Did people under age 35 buy houses in Manhattan in 1965? Probably not.
Most interesting to note is that Australia has been undergoing its own massive housing boom – which was NOT affected by the housing crash nine years ago (yes! It’s already been nine years!). The price of housing in Melbourne clocks in at $795k, and now we’re talking San Francisco prices. There’s huge concern in Australia that the market rise in that country is a bubble, so that comments made by real estate developers there ought to be put in perspective. Particularly by people who lived through 2008 in the U.S. perspective.
Let’s Do ALL the Math
Arguably, the average Millennial buying avocado toast instead of buying housing would be giving up $5 a day to buy a median-priced $232k house. Even assuming you ate that toast every day (which you wouldn’t), you’d save over $1500 per year. Actually, you’d save less because you’d have to eat SOMETHING else for breakfast which might cost from $.50-$5 in eggs, coffee, cereal, or protein shake powder, but let’s not think too much, let’s just call it saving $5 a day. Ok, you could buy the median house outright in 155 years.
But we’re not really talking about buying the WHOLE house, just probably a down payment, say 10%. That savings will take you 15 years. Unfortunately, that house in 15 years isn’t going to cost $232k anymore. Let’s say housing prices go up 5% a year; your dream average US house is now going to cost you $480k now. But luckily for you, the price of toast also went up, so if my handy dandy 35-year old HP12C is doing this correctly, if toast increases 5% annually as well, and you don’t eat it every single day, then in about 16 years, you will have saved $40k. Good on you! If you didn’t eat breakfast every single day for 16 years, you could afford a minimum down payment on a house in a generic rural area like Akron or Boise.
Just for fun, let’s do the math using the numbers THIS GUY was using as a frame of reference. Suppose you spent $19 a day on breakfast and wanted to buy a house in Melbourne instead. Wow! You’re saving $570 per month, and that’s $6000 per year – that’ll get you somewhere! To put a down payment on that Melbourne house, assuming the real estate market has a housing crash and recovers while you’re stocking away your dollar bills in the Avocado Toast Jar, you’ll have your down payment in about oh 8-10 years.
That’s my math. The New York Times fact-checking came at it another way. They noted that Millennials spend about $3,100 per year eating out, $305 more than other generations. Therefore, if these particular breakfast-happy Millennials spent the same as their cheap coffee-swilling parents and older brothers, the Times calculated it would take 115 years to afford a down payment. It just doesn’t add up. You can’t buy a house by giving up breakfast.
You can start to see why Millennials don’t particularly want to spend years saving for housing. By the way, the previous generations — the Baby Boomers and Gen Xers – didn’t either. It was the massive credit card debt and no money down mortgages racked up by those two generations that were a problem when the real estate market crashed. Can’t blame that debt on the Millennials. Prior to that, people like our grandparents may have saved for ten years to buy a house. But those generations didn’t come out of college with $40,000 in student loans, expensive health care, and career access limited to high tech or low-paying service jobs.
Are Millennials Buying Houses?
Homeownership for millennials definitely is down compared to previous generations. Ownership rates in the under 35 year old group which ran in the mid-40%s for much of the last fifty years has now dropped to only around 30%. Fewer people, but is that a lot fewer people? Mathematically, it’s 25% fewer (1 out of 4) but let’s think about it. If there are 10 people in a room, 6 of them were not buying houses before age 35 and still aren’t. 3 of them were and still are. Only 1 of them is eating too much avocado toast. Are we really having this entire conversation because of that one guy? What about the other 6, who have never been able to afford buying a house when they were as young as Millennials are now? Housing affordability for those 6 should probably be part of the conversation.
Given the perspective of the last thirty years, the problem isn’t breakfast at the Ritz-Carlton or hipster restaurants in Manhattan that we can all make fun of. The problem is housing that you buy at $232k or $485k or $795k which can drive you into bankruptcy during a severe downturn. As Millennials watched the crash and observed what the older generations went through, they might be understandably shy about investing in real estate.
What Millennials may do is influence a generation of developers to create smaller and more affordable properties which make more sense. Shared housing, microhousing, houseboats, and property guardianships have all been suggested as alternatives to the 2500 sq ft Dream House. Some of the ideas sound crazy, but I’m old enough to remember when condos were a strange idea. What the housing market needs is innovation more than savers. Not to mention that if too many toast buyers stop propping up the restaurant market, that ruins the economy in other ways.
And Who is This Guy?
This question is the easiest to answer of all. The guy who made these comments sells real estate, which means his livelihood is threatened by those who don’t purchase his product. He sells it in Australia whose real estate market was sheltered during the crash that hit his American and European counterparts, and he’s probably heading for a downturn. THIS GUY is making inflammatory comments not only because he’s a silly wanker who ought to keep his stupid opinions to himself (I’m just quoting the Internets here) but also because he needs free publicity. I could tell you more about his background which would make it clear that (a) he’s a Millennial and (b) he didn’t save for ten years to buy his first house, but the bottom line is this: he needs to continue to prop up the prices of his luxury Melbourne investments and he needs young buyers to do it.
Those of us older than 35 know that real estate moguls frequently believe that the real estate market can never go down. We know how that turned out eventually. A lot of the realtors in the U.S. are still working as baristas, right next to their Millennial friends with their giant student loans and their Instagram accounts.
What Millennials can do, while they soothe their indignation, is what all of us have done since we were younger and felt insulted by the older generation. Just wait.