Wednesday, September 23, 2009

The Unspoken Evil In the Housing Market, Country

(photo courtesy Sally Ryan/New York Times)

The New York Times printed an article today about the house next door to that of the Obamas (pictured above) being put on the market recently. It was an interesting article for many reasons, but hidden amidst the facts and figures is a phenomenon that is sadly not getting enough attention:

Very few people I know--college educated, with jobs--can afford to buy a house, regardless of record-low mortgage rates and falling home prices. Some of them have settled for overpriced condos, some have moved into farm country and face ridiculous commutes, most are prepared to stay in rental apartments far longer than previous generations ever did.

This is not healthy for our country, as we are now firmly on the path to becoming a two-class nation--working-poor renters and fabulously-wealthy landlords, the modern-day equivalent of ever-toiling serfs and their wealthy land-owning lords.

For Your Consideration:

The year is 1973. The house next to the Obamas, a beautiful 17-room mansion on the south side of Chicago, sells to a young couple for $35,000. The median household income for that year was $12,051; assuming they were average, the house cost 3 times their annual salary.

The year is now 2009. In 36 years, their house is now worth in the neighborhood of $1-3 million--an increase of between 28 and 85 times the original purchase price and a fabulously lucrative investment. In 2006 (the last year figures are available), the median household income was $58,407; the same house would now cost the new owner 17-51 times their annual salary.

[Also, keep in mind that the inflated 2006 figure reflects double-breadwinning households, which was not common in 1974, so the difference is even greater than it appears.]

And you wonder why so many people took out bad loans? They felt they deserved to live in a house, as hard-working, gainfully-employed couples--and they were right--but the market was such that there was actually no way they could afford to pay for one. Between greedy real estate developers, corrupt politicians, predatory bankers, insatiable real estate trusts, real estate speculation, and bidding wars, prices became artificially, unsustainably high. Wannabe homeowners forced their hand and they lost. Big time.

The Man: 9,941,994, Men: 0.

Meanwhile, the bleeding doesn't stop there, of course.

Real wages (adjusted for inflation) have remained stagnant since 1974, despite enormous increases in productivity and work hours. In other words, while costs have risen dramatically, you are making the same amount--or, in most cases, less--than your father did in 1974, when gas was $0.55 a gallon and a beer at a ballpark cost ten cents. A beer at a recent LA Dodger game set me back $12, or 1/12 of my daily take-home pay.

In the last 36 years, health care costs have skyrocketed, retirement benefits have dwindled or disappeared, and the cost of a private university education has gone from $10,000 a year to $32,000 a year (for public universities, costs have increased 37% in the last 10 years alone).

How are we supposed to live like this? How are intelligent people who have a soul--and, therefore, did not become shady bankers, selfish corporate executives, or lawyers--supposed to afford to buy a house somewhere that could be classified as 'non-bumblefuck?'
Homeowners’ equity fell to 41.4 percent of the total value of household real estate at the end of the first quarter of 2009. This percentage has decreased sharply since the end of 2005. It first fell below 50 in the fourth quarter of 2007 – marking the first time that homeowners’ mortgage debts exceeded their equity in their homes since 1945, when the Fed’s data begins.
There you have it, folks--sixty-four years of 'progress' has resulted in a net-loss of equity. Thank you, corporate America, for shipping all the wealth not in your own pockets overseas.

Are we reaching a point where intelligent, rational people are going to start moving off the grid in droves and repopulate depressed rural areas in their quest for an affordable house? Will we all have to live in factories abandoned by 'patriotic' corporations who moved all their non-executive jobs to China? Where will all these newly-rural people work? How far will they have to drive to shop somewhere that isn't evil-incarnate WalMart? How are they supposed to afford to send their children to school?

Or, since everyone has a college degree these days (thanks, University of Phoenix!) and a diploma doesn't even guarantee a job at Starbucks, will people eventually stop sending their children to college?

I know that sounds crazy, or at least illogical, but if we look at the matter honestly, and perform a simple cost/benefit analysis, at some point the costs will outweigh the benefits. Who wants to graduate college $100,000 in debt, with an ever-dwindling prospect of gainful employment and the looming fear that they will need to locate another $750,000 just to buy a house in the city they grew up in?

It wasn't even 100 years ago that most intelligent, productive people got their education in the real world, unable to afford a college education. They got menial or entry-level jobs and worked their way up from there.

However, what with unemployed PhDs fighting each other over janitorial jobs these days, another, more exotic option is becoming increasingly enticing, and probably as useful:

Formerly an option only for wealthy members of the aristocracy, these days a high-school graduate could choose--instead of going to college--to live, frugally, in a string of major European cities over a four year period, immersing him/herself in language, culture, and the arts. This would not only provide a well-rounded liberal arts education and--shockingly, but truthfully--be cheaper than attending a 4-year American college, but it also comes with free, top-o-the-line health care! Invent a time machine and sign me up!

Time to dust off your Grand Tour brochures, travel agents!
(If the Internet didn't kill you all slowly...)

You may think this is all a joke. You may think these ideas are radical, ridiculous, and ill-informed. You may be right, you may be wrong, but the way I see it, this is the very real, human side of the matter, one that is rarely discussed in the media, or over the dinner table.

The exorbitant cost of a comfortable, quality life in the United States these days--now more unattainable than ever--is the dubious result of three main factors:

1. Decades of unnecessary, harmful real estate speculation by wealthy American freelance speculators, deep-pocketed real estate trusts, investment organizations, and corporations.
2. The insatiable hunger for profit that defines the modern corporation.
3. The fact that our government has failed to act on behalf of its less-moneyed-yet-vastly-more-numerous constituents, failed to step in with laws/oversight/restrictions, and is therefore complicit in allowing the situation to spiral out of control.

For all their blustery talk about America being the richest and most powerful nation on Earth, the rich and greedy oligopoly has created a country its own hard-working citizens can barely afford to live in.

What, may I ask, is the benefit of that, aside from the pieces of silver lining their pockets?



Bruno Taut said...

I happened to bike near that very house this past Sunday, and the entire block is cordoned off with concrete barriers - you can't even breach the sidewalk. Chicago Police squad cars are stationed around each end; I assume they know all residents by sight & still check IDs. It's even better than a gated community!

As for everything else, anyone born after The Boomers needs to take some lessons from the gypsies. own as little as possible & keep moving. Those Leave It to Beaver brats took everything for themselves & sold the future out to Reagan. By the time they realize how much they fucked their own retirements - to say nothing of their children's or their children's-children - it'll be too late to really change anything.

Thanks assholes!

Karl said...

are you kidding me? It's EASY to buy a house these days. All you have to do is be born rich. Duh!

LiteralDan said...

As a long-standing member of the Rabble, this clear description of something that's frustrated me for years makes me feel distinctly Roused.

Let's storm the castle!