The American Dream…But Flavored With Different Spices

My first house, in a Dallas suburb called Flower Mound, cost $117,000, which included the $10,000 cost for a new salt-water pool. 

My salary at the time was $43,000. 

My wife was earning about $45,000. 

I still remember the moment I signed the mortgage papers for $102,000. I was sweating. I remember feeling a bit nauseous. I was committing myself to repaying six figures, more than she and I earned in a year, 2x what I earned. 

Financial ruin surely awaited. 

I looked at my then wife. She knew what I was thinking. But she smiled and nodded reassuringly. 

That was 1993. 

This yellowed memory returns by way of a tweet that popped up recently and went viral. It was a picture of an advertisement for new homes in a Miami subdivision called Westwood Lake, about 13 miles southwest of Miami International Airport. 

Cost: $7,450 for a two-bedroom house. 

If you want a three-bedroom, be prepared to pay an extra $450. 

Now, I should clarify: This ad was from 1955.  

Today, to get into that same neighborhood, with the same 1950s tract homes still there, will cost at minimum $485,000 and could run up past $1.4 million. 

Seems like a huge gain. I mean, it is. But mathematically, that’s just a 6.34% annual gain, assuming a buyer splurged on the three-bedroom house for $7,900, and sold it today, 67 years later, for the low-end price of $485,000. 

But here’s where we stumble upon one of the biggest challenges in America, and which is causing such a world of hurt socially, economically, and politically: Weak income growth. 

Back in 1955, the average household income was $4,400. Extrapolate that out at the same 6.34% over the last 67 years, and today’s average household income should be about $270,000. 

All good, except that…someone forgot to tell the American economy to let salaries rise alongside housing costs. 

In reality, average household income in America is somewhere between $68,000 and $80,000, depending on which set of statistics you’re partial to. At the high end, that’s an annual increase of about 4.4%…which, to me, is kinda remarkable. 

Less than two percentage points makes all the difference in the world. 

We can go on for days and weeks outlining all the reasons why this is the way it is. Globalization, governmental policies that favor businesses over people, warped tax policies, the role of lobbyists running government, an economy and monetary system poorly managed by a quasi-private Federal Reserve. 

Whatever the reasons, this is where we are and that’s pretty much that. 

The only factor that I see changing this particular status quo is the dollar losing reserve currency status at some point, causing a crushing monetary crisis that resets America at a much lower level on the ladder of prosperity. (To be clear, I’m not saying that definitely will happen. Just saying that’s what it would take to right this upside-down reality.) 

All of which is one of the primary reasons I am such an advocate of exploring a life overseas, in economies that offer better value and better opportunity. 

I’ve been visiting many over the last decade. Spain and Portugal. Mexico. Thailand. Uruguay, Costa Rica, and Nicaragua. Greece. Montenegro and Italy. 

Just recently I was in Jeddah, Saudi Arabia. I was stunned by how uber-modern that city is, how friendly the people are, and the crazy amount of Western consumer chains and restaurants that are everywhere. It’s not a stretch in the slightest to say that Jeddah is a misplaced piece of Orange County, California, or maybe Las Vegas. 

The point is simply that the American Dream—fully on display in that 1955 ad—is much harder to achieve today. 

It exists primarily for an increasingly narrow segment of the upper-middle class that earns the kind of salaries that allow them to afford an otherwise unremarkable, half-million-dollar tract home. 

But overseas…the American Dream is still very much alive.  

It’s just flavored with a different set of spices.