Luxuries have become cheaper, but necessities have gotten more expensive relative to income in much of the world - and that very much makes people poorer when it comes to actually affording necessities. In terms of ability to buy real estate, young Americans are poorer than the boomers were at their age. You can come up with whatever excuses for not including property prices in inflation calculations, but that's just cherry-picking data. It's not like renting has become cheaper, either.
No, Stockman, it's not cherry picking data. It's standard practice that prices of flows go into the cost of living. A house is a stock. The price of the corresponding flow of housing services is called rent. That value is imputed to owner occupied dwellings and goes into the cost-of-living calculation. [The same should be done with any long lasting commodity, but it's not worth the bother, with say, flat screens.] As I said upthread, buying a house is a combination of providing housing services for a long time + a speculative investment. But what is relevant to housing prices is restricted supply -- NIMBY -- a political problem.
Why the focus on real estate? It might have been efficient 40,000 years ago when a nesting instinct made us make -- nice nests. As for the rest, it's also just complaining about price changes. But all those are in the cost-of-living. Real median household income is higher now than in 1985 [even without benefits] and household size is lower.
Sure, not all individuals will do as well as the median. That's a personal problem rather than a societal problem, for we have a safety net.
Real income is defined as adjusted for inflation, which in turn depends on how you calculate inflation. Now, for the elderly, particularly the affluent elderly, house prices and rents admittedly don't factor much in the inflation they experience, as they largely already own their homes. But the young, save the most wealthy, own no real estate and thus must pay rent or get a mortgage, and even if they live with their parents many are trying to save for a deposit or downpayment - which means, for them, rent and real estate prices are pretty central to their cost of living. A house being an investment or not is basically a distinction without a difference, since real estate prices, either directly or through rent, have a massive impact on the the cost of living for the young. The divide is not so much between those above or below median income, but between the generations - between those who, to quote a comedian, bought a house for eleven raspberries and it's now worth millions, and those who saw housing prices shoot beyond their reach before they even entered the workforce. I'm not sure what drives it, but it's clearly a global phenomenon. In my developing country hometown, my working class grandfather was able to buy a house and support a household of four people on his salary alone, which would be pretty much inconceivable today.
You can argue that the cost of housing is "an individual problem" for the young who don't have generational wealth, but it has ramifications that affect everyone. Anecdotally, I've hear my students say that they've either decided against having children or view it as a very distant prospect based on the cost of living. Housing isn't the only thing affecting the cost of living for the young, but it's a big part of it. Ironically enough, perhaps those who are children today will actually benefit from today's declining birth rates.
