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Home-Ownership And The Stalled Economy

Home-ownership and housing. It’s a patchwork of red-hot and still-cold. We’ll look at housing and the U.S. economy.

In this Thursday, Jan. 9, 2014, photo, a for sale sign with a sale pending hangs in front of a house in Mount Lebanon, Pa. The National Association of Realtors reports on the number of Americans who signed contracts to buy homes in December on Thursday, Jan. 30, 2014.  (AP)

In this Thursday, Jan. 9, 2014, photo, a for sale sign with a sale pending hangs in front of a house in Mount Lebanon, Pa. (AP)

Housing is historically one of the great engines of the American economy.  Buying houses, selling houses, building homes.  It got out of control before the great bust.  In some places, the housing market is back like gangbusters now.  But overall, nationally, housing sales slipped significantly last month.  Mortgage rates are creeping back up.  Borrowing is tougher.  But it’s more than that.  Sales are down but prices are up.  Meaning, the affluent can buy, the middle class can’t.  And then there are the young.  This hour On Point:  buying homes, selling homes, and the new dilemmas in American housing.

– Tom Ashbrook

Guests

Neil Irwin, senior economic correspondent for the New York Times’ The Upshot. Author of “The Alchemists: Three Central Bankers and A World On Fire.” (@Neil_Irwin)

Susan Wachter, professor of real estate adn financial management at  the University of Pennsylvania’s Wharton School of Bussiness. Co-director of the Penn Institute for Urban Research. Author of “Inflation and Pensions” and “Latin American Inflation.” (@Susan_Wachter)

Celia Chen, senior director of the Moody’s Analytics research staff.

Allen Brake, realtor at Realty Executives of St. Louis. (@allenbrake)

From Tom’s Reading List

New York Times: Why The Housing Market Is Still Stalling the Economy — “Investment in residential property remains a smaller share of the overall economy than at any time since World War II, contributing less to growth than it did even in previous steep downturns in the early 1980s, when mortgage rates hit 20 percent, or the early 1990s, when hundreds of mortgage lenders failed.”

Quartz: The bizarre reality of the US housing market: Home sales are tanking, and prices are soaring -- “Even though the sales numbers are not great at all, prices of new homes are still rising sharply. In fact, they hit an all-time high in March, when the median price of a new home was $290,000. That’s 10.4% higher than the pre-crisis peak set in March 2007. And the 11.2% price jump between February and March was the highest on record.”

The Wall Street Journal: Why the Housing Market Has Slowed – “Even though home prices have stopped falling, traditional sellers have been slow to list their homes for sale, and construction of new homes is still very low. This means there still aren’t very many homes on the market, which has pushed prices up. That’s good for homeowners, but bad for anyone looking to buy a house who doesn’t currently own one.”

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  • HonestDebate1

    The recession should have been a blip.

    • Ray in VT

      Sure it should have been. Those millions of lost jobs were nothing.

      • hennorama

        Ray in VT — not to mention the massive declines in asset values, which made the Great Recession a balance sheet recession, rather than the typical boom-bust recession.

        The Great Recession (or Lesser Depression) is comparable only to the Great Depression.

        • Ray in VT

          A couple of people with whom I work were hit very hard in their retirement savings, and they were already in their early 60s, so they didn’t have time to recover their losses, as I did with my relatively small losses. They pushed back retirement by a couple of years, but it didn’t totally make up for those losses.

          • hennorama

            Ray in VT — and if they owned real estate, that got smacked around as well, and couldn’t consider selling in order to downsize, etc.

            You’ve told a cautionary tale about the prudence of changing one’s investment asset allocation as retirement nears.

          • Ray in VT

            I think that both had their homes totally paid off (I am buying one of those homes), although their current market values are well below their peak values.

            One had a more conservative allocation, but still lost some. The other was more aggressively invested, and she took it really hard.

          • jefe68

            OK, so she took a risk and lost.
            Once you hit 55 you should stop making aggressive investments unless you have enough capital to burn.

          • Ray in VT

            Darned straight. She made a number of questionable career and financial moves.

          • jefe68

            They will never make all of it back.
            This is why SS is needed. Why we need a Single Payer health care system.

      • jefe68

        HD is not dealing with reality, and reuses to deal with what happened in the largest economic downturn since the Great Depression.

        I’m not sure if he is ignorant of the basics of how the economics of downturns and recoveries work, or fens this ignorance out of connivence.

        • Ray in VT

          Can’t we just blame Obama?

          • TFRX

            But there is a protocol here.

            Abbott and Costello never began their famous routine with:

            “I don’t know.”

            “Third base!”

          • Ray in VT

            Good point. Maybe we can begin with his surrender to the robots. I enjoyed that there were several comments about that from Obama critics on Friday.

          • jefe68

            I thought that was already a given.

  • Charles

    I hate to beat the dead horse here, but the student loan mess isn’t helping.
    I’d love to buy a house. I have a job, I’m responsible, the kind of guy that banks would have helped out in the better times. But I have $40k in student debts which are going to tie my hands for years. The really sad part is $40k is about as little as anybody gets away with anymore. What about those folks who owe $100-200K?

    • John Cedar

      Do you live on the streets?

      • Charles

        No, I don’t live on the streets. Like millions of folks, I rent. Because you can rent the place you don’t really want for a third or a half of the price of a mortgage.

        • John Cedar

          Great! sounds like they only need to cut the cost of new houses to 1/3 of existing and then you can afford to buy.

          • Paul Gerrard

            No, I think you are missing the point. Charles is just saying it’s more than the price of homes — it’s a bigger issue that also includes the insane cost of tuition.

          • John Cedar

            I think you are missing the point.
            The money he is spending on rent could be going toward a mortgage if the playing field were leveled and an apples to apples comparison were made.

          • Paul Gerrard

            I meant no offense what I said you were missing the point. But, now I have to ask: “What level playing field?” I don’t follow you. And I’m not sure what comparison needs to be made. He isn’t buying a house because his student loan debt precludes a mortgage. He doesn’t live on the streets, and of course housing prices are not going to get cut by 33%. He can correct me if I am wrong, but I believe that he is saying high student debt these days is contributing to slow housing sales among young people, which is an aspect to the situation that no one else mentioned. And, it’s going to remain a problem because student loan debt is not going to go away soon.

          • Don_B1

            Note that banks look at the applicant’s debt, particularly student debt, when they set the interest rate before they approve the mortgage, which is thus higher for applicants with significant student debt.

        • Ray in VT

          So much depends upon the local housing market. Even with taxes and insurance my mortgage payment is likely much less than renting would be for a similar property.

    • James Pherris

      This is a very valid complaint. $40k roughly equates to $500 per month for ten years. That’s huge when starting out. UMass Amherst is $100k for four years that will cost about $600 per month for 30 years (>$100k in interest). That’s insane and a huge drain on the economy that must be paid for in other areas like housing.

      Now someone just needs to fix the tuition problem. =)

  • John Cedar

    Housing has a lot of pressure on it not to recover.
    With states like NY, where the state pushes taxes down to the local governments, you are looking at paying a lot of taxes on that home on top of your mortgage.
    In state like California, it takes years to get a building permit and the green gestapo has taken over the industry.
    New unwarranted building codes, storm water mitigation, engineering cartel fees all add tremendously to the replacement cost of new housing inventory.
    In years past power companies would drop a meter off at your construction site and set one pole for free. Today it all is paid for by the home owner.
    Municipalities used to hook up water and sewer and today the hook up fees can be thousands just for the permit and you have to hire and pay for the hook ups.

  • Human2013

    The US dream of home ownership is gone, gone, gone. To qualify for a home loan you need excellent credit, but more importantly, the applicant’s debt/income ratio needs to be at or below 30. That’s impossible with shamefully low wages and tens of thousands of dollars in student loan debt. Any mechanism to give American’s wealth and assets has wasted away. The recession and the “housing bubble” were nothing more than a transfer of wealth. I’m no longer using the term recession, I will continue to call it “America’s Wealth Transfer.”

    • John Cedar

      I bought a number of houses at deep discount, due to the housing bubble. I rent them out at below market rent to people who lack the self discipline to take care of themselves.
      One girl finally left her baby daddy, who is an alcoholic , oxy using, bath salt smoking guy on disability. but her financial situation didn’t stop her from getting a $300 tattoo or a new dog or the latest $600 video game for her 10 year old son, all while living in one of my places for rent free untill she could get on her feet.

      Another tenant I have is paying me half price for rent and still is not on time with her rent. She has even more tattoos plus drinks every weekend and consequently is in custody fight which takes attorney$, but found it necessary to go out and buy all new furniture and flat screen the week she moved in to my rental. In spite of the fact that she was offered suitable furniture and television by other people. and this girl is otherwise a bright person with lots of potential.

      That’s right folks, a lot of the housing problem is caused by the me generation and an inability to make spending decisions like an adult should be able to.

      • Human2013

        Let us not cite exceptions and stick to the rules, please.

        • John Cedar

          Why would you think the rule I pointed out was an exception?

      • jefe68

        And the point is what? That you rent to dysfunctional people who can’t get their lives together due to substance abuse.

        By the way you could rent to people who work and are not as dysfunctional.

        The rest of screed is complete nonsense.

        • John Cedar

          What landlord do you know who rents to people who don’t pay and gives them free rent or half price rent, besides me?
          Its charity and I make a big difference in their lives and in their kids lives.

      • adks12020

        Why do you rent to bad tenants? As landlord you have a choice about who you rent to. You also have the right to evict tenants that don’t pay if you drew up a proper lease.

        • John Cedar

          I do it to be nice to them.

      • Paul Gerrard

        This is one of the reasons why sales are down but prices are up. People with cash can buy up the homes (plural) to rent, driving up the price. I’m not saying it’s bad, but it is economics.

        • John Cedar

          Not sure what you mean?

          Cash buyers buy at cheaper prices, which brings the market down.

          It does bring the appraisals down for non cash buyers which makes it harder for them to obtain financing.

      • hennorama

        John Cedar — I have the exact opposite experience, with over 98% occupancy, and virtually zero payment issues.

        My colleagues report similar experiences. These are not limited to one locality, state or country.

        • John Cedar

          I hand picked my tenants with the intent of helping them through some tough times.

          • hennorama

            John Cedar — thank you for your response.

            Your altruistic intent is wonderful.

            However, have you considered that you may be enabling the behavior that you seem so critical of? And have you considered how your words describing these two women, and your implied judgment of their actions, makes you seem simultaneously patronizing and paternal?

            Thanks again for your response.

          • John Cedar

            It isn’t what it isn’t.

            They currently hold me in high regard while I keep my criticism for them to myself. If that is patronizing then I am a patron.

            “Great indebtedness does not make men grateful, but vengeful; and if a little charity is not forgotten, it turns into a gnawing worm.”

          • hennorama

            John Cedar — TYFYR.

            Again, your altruistic intent is wonderful. More power to you.

            Best regards.

  • AnneDH

    It looks to me that now only couples can afford houses… the earning power of two. Problem with that of course is that these relationships don’t always last the length of time it takes to pay off a mortgage.

    • John Cedar

      Home owners can take in room mates and achieve the same thing.

      • AnneDH

        Yes, that is happening more and more. My mother did that after my father died.

    • Paul Gerrard

      Another way to get the benefit of “couples” is to have two single people buy a duplex together. If banks could creatively package this, we might see more construction of duplexes.

  • Coastghost

    Some people have no good business owning their residences, just as some people have no good business attending post-secondary school.
    Then there’re all those details and the devils crowding around them . . . .

    • http://neilblanchard.blogspot.com/ Neil Blanchard

      Why aren’t lenders doing their due diligence? Are they looking the other way – because they are incentivised to make more loans? In fact, aren’t the lenders trapping borrowers into loans they know they shouldn’t make?

      • adks12020

        Lender’s have actually restricted credit the past few years. That’s one of the reasons it’s easier for the affluent to buy than middle class people, better credit and more assets for collateral. It’s more difficult for anyone to get a loan now then it was in 2007.

        • John Cedar

          Appraisal rules are a larger culprit.

    • John Cedar

      Your point is a point I was making.
      And the larger point is that the pool of people who have no business owning their residence is growing because of our culture (or lack of culture).

  • http://hlb-engineering.us/ HLB

    The affluent can buy; the locals have no jobs. Thank goodness we invited all those wealthy foreigners to move in and take all of the opportunities. To have a life. “We the (Foreign) People” salute America.

    * US State Dept. has a special VISA program for wealthy foreigners. Essentially they go to the front of the come and stay here. Literally, forever. The Chinese have now moved ahead of the Russians in ownership of New York City properties.

  • wauch

    If we continue to rely on 72-75% consumption as % of GDP and the real-estate market being propped up and always searching for the next bubble we will never generate economic resilience and redundance needed to buffer us against various socioeconomic, health, and environmental shocks. We have “elites” like Greenspan saying you can’t predict a bubble, bipartisan love affair with home ownership society, and economists referring to the average US citizen as “the consumer”.

  • http://hlb-engineering.us/ HLB

    America is growing but the housing market is stalled. –Tom Ashbrook

    More like, America is groaning. And the permanent job market is dead.

  • twenty_niner

    Before the cheerleading starts…

  • http://hlb-engineering.us/ HLB

    Q. for the panel: has any US city had the run up in house prices like that in London, UK?

  • MarkVII88

    The Vermont housing market is absolutely nuts. The prices for homes in Chittenden County (the most populous) are off the charts. On top of that, the state funds education via a state-wide property tax system. With home values so high (inflated) state-wide education property taxes are incredibly high (98 cents per $100 assessed value for a homestead and $1.515 per $100 assessed value for non-residential/commercial). This sets up a system where many homeowners cannot afford to pay their own property taxes, especially the elderly who own their homes outright. The State of Vermont badly wants to promote home ownership so they offer an income sensitivity provision to the statewide property tax such that even households that make as much as $90,000/year can get a rebate on their property taxes. Some households can save up to $8000/year on their property taxes. Over 60% of Vermont homeowners qualify for income sensitivity. This all comes out of the Education Fund, making it even harder to pay the bills. The housing market in Vermont is full of very old housing stock that has relatively low energy efficiency to boot. If the Vermont housing market more closely followed national trends, it would be a lot more affordable to own a home here.

  • Sue Leroux

    Please discuss how a whole generation no longer believes home ownership is a wise financial investment?

    • Charles

      I’ve considered this myself.
      First, I’ve seen people with a large chunk of their equity tied up in a home lose it when markets turn south.

      Second, as someone who is more pessimistic about our job markets in the next decades, the only places where homes will be useful is in the large cities where the jobs are. You might be able to afford a home in podunk-ville, but if there’s no jobs there what good does it do?

      I’ve started thinking seriously about not buying a home at all. There’s no telling where my family might have to move as the years progress and it would be a lot easier to have a healthy portfolio of stocks and bonds, etc, that are much more portable.

      • Sue Leroux

        I am living among a generation of people who thought their home would finance their retirement. Guess what? They now can’t sell their homes! Also, many boomers refinanced to the point where selling would not net them any cash at all.

        • Charles

          My parents’ home is pretty much worthless as an investment, it’s not going to provide any kind of income for retirement, but at least it’s a place to sleep.

          Point is, just because something’s cheap doesn’t mean it’s a bargain.

        • hennorama

          Sue Leroux — this is part of the reason for a relatively low supply of homes for sale in many areas — sellers who have little to no equity.

        • adks12020

          Well a home should never have been thought of in that way. A home is a consumer good just like anything else. Expecting a good return on investment in an ever fluctuating housing market is a ridiculous fantasy pushed by realty associations. Sure, it can happen, but home buyers shouldn’t expect it to and should be finding other ways to save for retirement.

        • Human2013

          Hate to be the one to tell you this — but in this country, unfettered capitalism reigns supreme.

          • TFRX

            I was gonna say something about how “unfettered” isn’t the same adjective as “free market dreamtime” w.r.t. capitalism, but I think you already know that.

    • hennorama

      Sue Leroux — the idea of one’s home being “a wise financial investment” is relative to one’s expectations.

      If you do not consider the other benefits of home ownership, such as having a nice place to live, added control, tax advantages, cost relative to renting, etc., and think of home ownership as a financial investment, a piggy bank, or a retirement vehicle, you will be disappointed during real estate downturns.

      As the saying goes, “Trees do not grow to the sky.”

      • TFRX

        But, to complicate things further, isn’t there also a strained high-renter’s price situation in many markets which makes it worse to rent? That’s screwing up the normal relationship between buying and renting.

        I mean, it’s one thing when a single college grad (say, within five years of cap and gown) takes an apartment. But when one goes on and on paying what is basically the landlord’s mortgage and property tax, that’s piffing money away.

        At the end of buying a house, one still has a house.

        • hennorama

          TFRX — there are definite pros and cons of both renting and home ownership, as you have pointed out.

          The phenomenon you point to, the ratio of the costs of renting vs. the costs of home ownership, varies quite widely. In some markets, it’s considerably cheaper to own, and in others it’s considerably cheaper to rent.

          Repeating yet another old saw: the three most important things about real estate are location, location, and location.

    • Don_B1

      There are multiple objectives that people desire investments to achieve; most, if not all, investments can achieve only a few of them, so a good retirement must be funded by a diverse array of investments.

      1) Consider that Robert Schiller (Case-Schiller Housing Index) first detected the housing bubble as he observed the growth of housing prices versus rental costs. A house, on average, will never outperform the growth of the cost of living, as the next generation will have only so much money for housing, so the balance of demand and supply will basically track inflation, with occasional short-term excursions. Thus a home is a store of value against variations of the economy, but with a downside larger than a savings account and limited upside by the ability of purchasers to afford higher-priced housing.

      2) The stock market is where average growth does outperform the growth of inflation, but there is much more volatility, with surges and crashes, that can double your money almost overnight in the right conditions but just as quickly wipe out your savings, particularly if you invest in the more speculative side o f the market.

      3) Savings accounts are clearly the safest, within the bounds of the deposit insurance limit (per bank), but the amount will not grow strongly, and is subject to interest rates that can drop for long periods. Consider today’s elders with small retirement funds that preclude stock type investments because of their volatility but who need to have some growth to cover inflation. the current bank interest rates barely maintain their value relative to inflation, and that is before any withdrawals for living expenses.

      Note that the elderly should be the first and strongest supporters of government stimulus to get the economy growing quickly so that their savings accounts can provide a higher interest rate. But continuing austerity policies will only extend the period of slow (stagnant) growth. Many economists are now talking about secular stagnation for many of these reasons.

      • Sue Leroux

        Well said, Don. The objective is to diversify your investment strategy. No one vehicle is going to see you through.

  • creaker

    2 things – one, many Americans have to realize they are no longer at the level where they can afford to buy a home. As a nation we are poorer.

    Second, we keep comparing the numbers to where we were before the bubble busted – but those numbers were only obtainable with an unprecedented real estate and debt bubble. The only way we are ever going back there is with another unsustainable bubble.

  • http://hlb-engineering.us/ HLB

    A house is not an investment if you have to live in it.. to live.
    –Karl Marx Real Estate Broker, Member AWGF

    {ain’t we got fun}

  • http://neilblanchard.blogspot.com/ Neil Blanchard

    Housing is a *symptom* of an extractive based economy. Flat or dropping wages cannot support the economy because financial practices are extracting money rather than investing in productive businesses; as the stock market was designed to do.

    Most economic activity is extractive and has no multiplying affect. A truly productive economy would be a stable base for our economy. Cheap oil and factory farming and off shoring jobs and bread and circus devices like cable TV – are all extractive, and therefore not sustainable.

    • Human2013

      You’re On Point. This form of capitalism is turning out to be a very corrosive disease. Even if we attempt to treat the symptoms, there is no cure for the disease. The stock market is nothing more than a mechanism to transfer wealth as we saw in the “recession,” Mitt Romey and his ilk pulled their money out first and the rest of us suffered. Berkshire Hathaway – 30% returns. Really?

      • Fredlinskip

        There are cures- Hopefully American people wake up at some point long before it morphs into complete economic collapse.
        Redistribution to the top of economic pyramid is simply not sustainable- in ANY society or ANY political system.

    • nj_v2

      Yet another OnPoint program dealing with a reductionist economic issue, failing to look comprehensively at how these various “problems” (housing, employment, resource use, environmental, etc.).

      As ever, the implication is that “growth” is the holy grail, and when the economy isn’t “growing,” we’re all in deep stuff.

      At this point, it seems as though it is willful avoidance that the program has yet to consider alternatives to the failing paradigm oligarchic, growth capitalism.

      Here’s the reading list for the program:

      http://steadystate.org/

      Perpetual economic growth is neither possible nor desirable. Growth, especially in wealthy nations, is already causing more problems than it solves.
      Recession isn’t sustainable or healthy either. The positive, sustainable alternative is a steady state economy.

      http://richardheinberg.com/bookshelf/the-end-of-growth-book

      The End of Growth: Adapting to Our New Economic Reality

      Economists insist that recovery is at hand. Yet, unemployment remains high, real estate values continue to sink, and governments stagger under record deficits. The End of Growth proposes a startling diagnosis: humanity has reached a fundamental turning point in our economic history. The expansionary trajectory of industrial civilization is colliding with non-negotiable natural limits.

      http://www.upne.com/1584654953.html

      The Myth of Progress
      Toward a Sustainable Future

      A provocative critique of Western progress from a scientific perspective

      In this compelling and cogently argued book, Tom Wessels demonstrates how our current path toward progress, based on continual economic expansion and inefficient use of resources, runs absolutely contrary to three foundational scientific laws that govern all complex natural systems. It is a myth, he contends, that progress depends on a growing economy.

      http://www.vox.com/2014/4/8/5592198/the-short-guide-to-capital-in-the-21st-century

      The short guide to Capital in the 21st Century

      Thomas Piketty’s Capital in the 21st Century is the most important economics book of the year, if not the decade. It’s also 696 pages long, translated from French, filled with methodological asides and in-depth looks at unique data, packed with allusions to 19th century novels, and generally a bit of a slog.

      The good news is that there’s no advanced math, and anyone who puts in the time can read the book. But if you just want the bottom line, we have you covered.

      Can you give me Piketty’s argument in four bullet points?

      • The ratio of wealth to income is rising in all developed countries.

      • Absent extraordinary interventions, we should expect that trend to continue.

      • If it continues, the future will look like the 19th century, where economic elites have predominantly inherited their wealth rather than working for it.

      • The best solution would be a globally coordinated effort to tax wealth.

  • http://hlb-engineering.us/ HLB

    The rich get richer and the poor get.. children
    In the meantime
    In between time
    Ain’t we got
    normal capitalistic market forces.*
    –F. Scott Fitzgerald {almost}

    Up next we thank: high frequency trading

    * Thank the American experiment with good government and prosperity for all

  • http://hlb-engineering.us/ HLB

    The tornadoes whipping through the central portion of the USA today may increase the demand for new homes. The funny thing is: destroyed homes that are repaired or replaced are factored in to computing our nation’s GDP! Ain’t economics neat?

    * So is all labor and goods necessary to scrape the pad and furnish the new place: merely the replacement for the old one. You had a home; now you have a home. You’re out of pocket. But America is better off, thanks to economic reasoning.

    • Don_B1

      Note that the people who did the work to replace the destroyed infrastructure, homes and furnishings did benefit from the work; now would it have been better if that work had provided new facilities, e.g., for families just forming instead of living with parents, etc.? Undoubtedly, but deciding how to make that differentiation seems to be controversial?

  • twenty_niner

    If interest rates go up even a point, which is likely in the next two years, you can kiss house prices, especially at the high end, goodbye. In other words, if you’re on the sidelines, hold off for a couple of years and wait for prices to pull back. Remember, you can still write off the mortgage interest.

  • Jim

    The national housing market is uneven. The hottest market is where the hottest jobs are, right? Ok, it might be too simplistic. There is a foreign phenomenon as well. According to a wsj mansion section, Chinese nationals are buying housing in strong education market such as Boston and NYC. What makes you think where the cash buyers come from?

  • Ricardo

    Can your guests comment/describe the real-estate market in Fairfax, VA and other communities outside the D.C. beltway? Both buying and renting. Thank you.

  • PaulCJr

    The way it seems to me, one needs to be mobile if they want to maintain a good middle class lifestyle in the US and globally today. Because if your company closes shop, moves out of town, or more money presents itself somewhere else, one needs to be able to move to these opportunities. Having a house becomes an albatross around someone’s neck if you need to move for better economic opportunity. This ability to stay mobile is the reason why I haven’t made the home ownership plunge even though I could afford to.

  • Yar

    Maybe something is changing in the housing market that isn’t recorded, we just emerged out of a long cold winter and it is possible that the available housing stock is unattractive because it is not energy star construction. Like the US car market in the early 80′s which was slow to change to demand, people are looking for what isn’t on the market. Make a product they want and they will buy. Without job security and desirable products it makes more sense to rent. What are the statistics on high efficiency housing stocks?

    • PaulCJr

      I agree with you Yar. I personally like living in large dense cities, and a lot of the big home building companies like building more suburban homes. Give me a city town home. That’s my housing preference. Not a lot of builders are doing this. Good point man!

  • timcahill98

    Please talk about the effect that student loan debt has on potential future homeowners. I’m 50 and still have over $100K in student loan debt, which makes saving for retirement and/or a down payment on a home nearly impossible.

  • http://hlb-engineering.us/ HLB

    Squeezed and bled. –Tom Ashbrook

    Yep. Our new economic miracle. The New Normal.

  • Yar

    Please explain why multi-generational households are not desirable? They are the norm for the past thousand years.

  • twenty_niner

    80% Of All New York, Florida And Nevada Condo Purchases Are “All Cash”.

    A lot of which being investor purchases fueled by funny money from the Fed. When you print $85 billion / month, it has to go somewhere.

    http://www.corelogic.com/blog/authors/thomas-vitlo/2014/04/cash-is-all-the-rage-a-closer-look-at-condos-bought-with-cash.aspx#.U15mhvldV4p

    • Human2013

      Love the “funny money”. Our economy is based on “funny Money”

  • creaker

    Another show bleeding denial of where we’re headed and hope that we’re going to get back to this magic medium that never really existed in the first place.

    Just continue to work as hard as you can to make your employer money and buy lots of stuff until you drop.

    • The poster formerly known as t

      I’d like to point out that “buy a lot of stuff” has been “borrow a lot of money to buy a bunch of low quality, potentially harmful stuff until you drop.” in recent decades.

  • twenty_niner

    YOY housing formation:

    • Paul Gerrard

      This is Household formation, not new housing.

  • http://hlb-engineering.us/ HLB

    I will move a Chinese multimillionaire to New York City so she can buy a tiny apartment for $3M. The older, past occupant* now forced to move to Staten Island to find someplace to rent. (If he keeps his job.) And we add another American to the property rolls. Who can’t see that we all win with this system in place?
    –Barack H. Obama {Visionary for All Time}

    Yeah. The old duffer is probably a veteran of our military, too. Maybe he was wounded in action, as well. So, what’s he got to complain about? He did his duty. “Come on, Grandad: Move on and spend your nights at the VFW. Half price beer and free peanuts.”

  • Jo Bleaux

    This seems to me to be part of the ongoing feudalization of America. More than 30 years of trickle-up economics has produced an oligarchy. Corporations are sitting on piles of cash, but won’t hire. Banks have piles of cash, but are reluctant to make loans. So, it makes sense to keep more and more of the population as renters rather than buyers.

    • http://hlb-engineering.us/ HLB

      If they’ve got the $ to rent with. Hoober Doober

    • Don_B1

      The reason that corporations do not hire is that they do not see the demand for the goods and services those new hires would produce.

      The reason they don’t is that consumers, who are mostly members of the middle- and lower-income classes, are not spending, because they have not shared in the profit growth, particularly for the last five years, but actually since the 1980s, with the exception of the late 1990s.

      That is at least part of the cause of “secular stagnation,” one of the new “buzz-words,” which is about predicting that there will be less than full employment and thus slower economic growth for the U.S. (and other advanced economies, e.g., Europe) because, for a major reason, politicians will not do what is necessary to change the Less Depression economics, like those of Japan now.

      This can be ridiculously horrible, like what has happened in Sweden, where the politicians and a coterie of conservative economists have implemented austerity policies in a slow economy, which has pushed its economy into deflation. Sweden had only started to recover from its recession, which was much shallower than the Great Recession that hit the U.S. and other parts of Europe, but was making progress until austerity was implemented.

      Europe is keeping its own recovery in the refrigerator because of its insistence on austerity.

      There will be plenty of time for austerity when the country’s economy has regained full strength, when it will actually need to be reigned in.

      • The poster formerly known as t

        Have you ever entertained the concept, that on a finite planet that economic growth will eventually dwindle to zero percent? Where is this “full strength” economic growth suppose to come from? From government spending projects where governments build more roads anticipating more oil consumption in the face of rising oil prices?

        • Don_B1

          While it is true that all economic growth is not equal, there is plenty of areas where effort can be placed which would:

          1) Increase the efficiency with which energy is used.

          2) change the sources of energy from those that pollute (mercury, arsenic, sulfuric and nitrogen oxides, etc.) including the production of CO2 from burning fossil fuels, which otherwise will end up costing many times the amount that the increased flooding and drought (alternating both over time and place) will cost.

          3) Using sustainable sources of energy will allow increased energy use, but as that allows a growing wealth in the middle class and less fear of poverty in the lower-income class, the birth rate will drop and a sustainable level of human population can be reached.

          That is the optimists’ course, and much can go wrong, as Thomas Piketty’s book emphasizes, but the alternatives are catastrophic for most civilized life, and that needs to be avoided.

          • The poster formerly known as t

            Most civilizations wind up being unsustainable and collapse. Often, they may run out of a key resource and catastrophically collapse. Our technological civilization is especially unsustainable because of the use of high-density energy sources, which tend to be unsustainable, like fossil fuels and nuclear. The very few energy sources that are
            sustainable won’t allow for increased energy use because they have a lower energy content per unit. You’re not optimistic, you’re just uninformed. Humans have used solar energy and wind energy sustainably for 100s of years if not 1000s…in very technologically simple societies compared to today. Those technologically simple societies used a lot less energy than the dominant technological societies in the world use today. Modern technology just won’t exist without the heavy use of fossil fuels. They use a lot more energy than sustainable energy resources can currently provide. Modern technology, for the time being, is NOT sustainable.

  • MarkVII88

    Is it any surprise that home builders really only want to build high-end homes? Just like when you go to the car lot, there’s not a lot of the more economical base-models on the lot often times. Builders don’t make as much when the total cost of construction isn’t as high. There’s only so many houses you can build in a given length of time and it’s better for the builders if those homes cost more.

  • Moe

    Many people are employed by an agency on W2 bases so on paper they are employees.
    BUT, if they are contracting the bank requires two continuous years of employment to approve them for a mortgage.
    and… there are almost always gaps between contract assignments!
    Banks need to re–think their dinasour way of underwriting!!

  • Human2013

    It’s Capitalism, STUPID!

    • James

      Funny money from the fed is not capitalism my friend, that’s Keynesian stimulus.

      • creaker

        It’s oligarchy – or plutocracy. Choose your favorite.

  • Jim

    I wish people are not deluded. Owning a home is NOT the American dream. Having a roof on top of your head is more important. There is nothing wrong with renting.

    A transient job society requires you to be mobile.

    The only true group of people who should be home owners is the retirees.

    • hennorama

      JIm — there are pros and cons for both renting and home ownership.

      Families raising children tend to be very stable owners and renters, largely due to school district considerations.

      • John Cedar

        One big pro to owning and trading the first couple homes, is the tax free capital gains that Clinton enacted, which provided the air for the first big bubble.

  • IP_sock

    The only thing that has me puzzled is, why is this surprising to economists? Heck, I’m nobody, and I predicted this years ago: if college grads are all saddled with excessive student debt, they aren’t going to be able to buy my house when I retire. That’s where the missing households are, and that’s why housing sales have largely remained flat (with the exception of a few pockets here and there).

    The next question is, why haven’t housing prices fallen? That’s an easy one as well: everyone who bought long before the boom has retired, and have been selling their homes. Because they bought before the boom, they can afford to drop their prices, and they’ve sold. The people who bought at the peak have probably already been foreclosed on. The people who bought on the upswing are what’s left, their houses have appreciated, but not so much that they can afford to reduce the price.

    So again, why is this such a surprise to economists?

    • Human2013

      It took a French Economist to tell US economist what was unfolding under their noses, in their economy.

      • Don_B1

        Thomas Piketty documented in irrefutable terms the whys of what economists here had learned, that the superrich are walking away with all (over 90% to the 1%, a large portion of which went to the 0.1%) of the growth in income since 2009. He provided a new insight showing that those with inherited wealth were fast approaching 50% of the superrich. [Note that 6 of the wealthiest people initially got their wealth from inheritance -- the Koch brothers (2) and the Walton family (4).]

        But Piketty is working with economists in the U.K. and here in the U.S. (Emmanuel Saez at Berkley).

        • Human2013

          His book has really made me question US academia and their cozy relationship with big business. We are suppose to have the best schools in the world with the brightest minds, so why haven’t we seen something of this scale come from US academics – taking the lead. Picketty notes that he questioned the theories and practices of US economists while studying here.

        • pete18

          “Professor Piketty estimates that the return on capital over the coming decades will be between 4 percent and 5 percent; historical returns to equity investments run about 7 percent, but let’s be conservative and split Professor Piketty’s estimate, assuming a 4.5
          percent return. And in keeping with the first theorem of English-major math, let’s replace that 12.4 percent Social Security tax with a poet-friendly 10 percent. Investing 10 percent of your income at a 4.5 percent return over the course of a 45-year working life produces a higher income in retirement than you enjoyed in your working life,
          regardless of your income level. It’s true if you make $10 an hour or
          $10,000 an hour.

          Example: Assume you make the modest sum of $20,000 a
          year and never get a raise. You invest $2,000 a year at 4.5 percent for
          45 years and end up with just over $300,000, which, taking the most
          risk-averse course, can be converted into an annuity paying $1,800 a
          month, more than you made in your job. In fact, by the end of your
          working life, the returns on your investment — just the returns — would
          add up to about 70 percent of your salary. Start working a few years
          earlier or work a few years more, and the numbers are even better,
          enough to have a substantially higher income in retirement than you had
          when working.

          Professor Piketty rejects such investments, citing
          the volatility of investment income. (As several critics have pointed
          out, he gives scant consideration to the risk of holding capital when
          considering the question of inequality, which is odd: Returns on investments are the payment one receives for bearing risk.) He writes: “For a person of sufficient means who can wait ten or twenty years before taking her profits, the return on capital is indeed quite attractive.” And it’s even more attractive at 45 years or 50 years, which is precisely what we should be encouraging.”

          http://www.nationalreview.com/article/376632/get-rich-or-die-trying-kevin-d-williamson

          • Human2013

            Oh, Pete. Will you kindly share with us how many Americans have “capital.” Will you kindly tell us how someone making $20K a year is going to have $2K to invest. The problem is that most Americans are working with “earned income” and not “capital gains.” Also, inheritance is great, but we don’t want to replace meritocracy or the “self-made” with the “silver spoon”.

          • pete18

            The article is about reforming Social Security based on the conclusions drawn by Piketty.The person making 20k already “invests” more than that amount in Social Security payments. If SS was reformed that earner would have enough to invest 2k and still have some left over to give large donations to George Soros.

            “Also, inheritance is great, but we don’t want to replace meritocracy or the “self-made” with the “silver spoon.””

            So again I ask, are you saying we should forbid or limit how much someone (this includes people who have earned their wealth by their merit) should be able to pass on to their relatives?

          • Guest

            There’s no such thing as the “self made” man. Anyone who’s claiming to be “self-made” is not telling you who helped them get where the are.

          • pete18

            Yes, and…?

          • Fredlinskip

            How about we do away with 401k’s and bring back pension funds. That way when bubbles burst, employees actually can still thrive.

          • Don_B1

            Note that you didn’t include the fact that most of these “retirement funds” have high (relative to the amount poor people can put in them) management fees, which make pete’s “growth projections” ludicrous.

          • pete18

            That’s not true. There are tons of low fee investments accessible for moderate and low income earners.

          • The poster formerly known as t

            Are you referring to junk stocks? Or government debt?

          • pete18

            No, index funds by Vanguard, just to name one.

          • Fredlinskip

            Simple solution that certainly would help
            How about we tax capital gains at the same rate as earned income??
            Does it not seem more realistic that investment gains should be taxed at same rate as income earned by “sweat of brow”?

        • pete18

          “[Note that 6 of the wealthiest people initially got their wealth from
          inheritance -- the Koch brothers (2) and the Walton family (4).]”

          Yes, and? Are you saying that we shouldn’t allow people to leave money behind to their families?

          Are those rich people stealing it somehow?

          • Don_B1

            I am not saying that, except I am saying that leaving excessive wealth “behind” gives those receiving that more than “a leg up over the remaining” and we all pay for that as the contributions of people who never get a chance are often much greater than the contributions of those who receive great wealth.

            I am sure there are some, but how many people who inherit great wealth also make great contributions to the country’s success.

            Before the Bush administration included the ramping down (to zero) the “death tax,” inheritance taxes only affected estates of about $4 million, which is more than enough to ensure the pleasant life of just about anyone, particularly given that those inheritors also probably got the best education possible given that there was that much money in income to grow the estate to that level. The estate tax level at which taxation begins has moved away from zero, but is considerably higher than $4 million today, I believe.

          • pete18

            “and we all pay for that as the contributions of people who never get a chance are often much greater than the contributions of those who receive great wealth.”

            How do people who get a “leg up” from inheritance keep anyone else from “contributing.”

            Tax receipts went UP after Bush’s tax cuts, so how can it be said that changing the death tax rate has negatively affected anyone who hasn’t inherited money.

          • Don_B1

            As usual when tax rates go down, particularly capital gains tax rates, there is a surge of people cashing in long-held securities with accumulated gains as the taxes are then lower than they had been. It is a short-term phenomenon, and tax receipts decline for that segment of tax receipts subsequently. Obviously as the economy grows the total tax receipts do continue to grow, but not as fast as they otherwise would have.

            Inheritance taxes only affect a small number of people (less than ~100,000) but they do affect the actions of those people who would make different investments without them.

          • pete18

            “Obviously as the economy grows the total tax receipts do continue to grow, but not as fast as they otherwise would have.”

            Pure speculation on your part. Higher tax rates often bring down tax receipts.
            The argument that you have lost even more increases in tax dollars, rather than prevented losses of tax dollars by cutting the inheritance tax, is quite a different argument and makes quite a presumption of the government’s right to MORE of the American taxpayer’s money than they already have.

            “inheritance taxes only affect a small number of people (less than
            ~100,000)”

            Seems to be arguing against your own point.

            but they do affect the actions of those people who would make
            different investments without them.

            How so? Please explain how that works.

          • The poster formerly known as t

            Rich people steal resources. Rich is also relative. On a global level, American corporations are stealing resources that don’t belong to them and that they haven’t earned under the banner of open markets. If a country refuses to export oil, well, that’s just not acceptable, so to many people around the world Americans are seen as usurpers, not liberators or opportunity providers.

          • Fredlinskip

            Yes but we are pretty good art blowing things up and occupying other countries, now and again- surely that counts for something.

          • Fredlinskip

            The inheritees certainly didn’t earn it.

            If we want Social security, Medicare, medicaid, National Defense, and to pay down National debt someone needs pay for it. Lowering taxes on the wealthy has not seemed to help.
            Quite the opposite, actually.

          • pete18

            I don’t understand your math, US tax receipts have not gone down after taxes on the wealthy have been cut.

            “The inheritees certainly didn’t earn it.”

            Yes, and….?

          • Fredlinskip

            Then why did national debt triple under Reagan?
            We either fund entitlements or we don’t. If we don’t fund them, than they should not have been created. they were created at a time when highest brackets were taxed at much higher rate.
            Perhaps people should do their best to earn a living in America- that goes for “inheritees”- No matter what inheritance tax is, they will be plenty advantaged- don’t worry your little heart about them.

          • pete18

            It doubled because SPENDING went up. Much different problem than taxation.

    • John Cedar

      What about the people who were smart enough not to borrow money for a degrees that did not make economic sense to purchase and work for?

      • The poster formerly known as t

        They’re clearly a minority and you can’t count on them to drive the real estate market in the U.S.

        • pete18

          So we should continue to enable economic
          stupidity?

          • The poster formerly known as t

            Yes, well economic stupidity has created a lot of jobs in the education sector and has hidden economic problem in places where there are a lot of colleges. Places without a lot colleges tend to look a lot like Detroit. Much of higher education is for-profit activity masquerading as non-profit activity.

  • http://hlb-engineering.us/ HLB

    The Must Haves and the Have Nots fighting over the same overpriced house on a tiny piece of dirt. In 30 years, our nation will look like Israel & Palestine. A divided region teetering on a knife edge preparing for the final, winner-take-all conflict.

    Thank goodness I won’t be here to see it.

    • The poster formerly known as t

      I thought you were inferring how climate change would make large areas of America uninhabitable due to extreme heat or flooding, but mostly extreme heat. An America, where the geography would be semi-arid would certainly provoke wars over scarce fresh water and the last barrels of oil. You see, I see the effects of climate change and fossil fuel depletion happening at the same time, which would make maintaining civilization as we know it, impossible.

      “Thank goodness I won’t be here to see it.” That is how the average person reacts to any kind of long term environmental problem, even if they have family members they care about that will be here to see it.

  • http://hlb-engineering.us/ HLB

    “Fanfare for the Rich, Foreign NYC Apartment Owner”

    Aaron Copland didn’t live long enough to pen that musical masterpiece. A pity, really.

  • Taylor

    My wife and I are finishing graduate schools and moving to San Francisco next month from Nashville. We need to live in the city and will therefore be renting- a scary prospect as I continue to hear more on the SF market! Any tips on how two middle-income applicants can secure a (relatively) affordable apartment in such a hot market?

    • jefe68

      Move outside the city. From what I’ve head, and this from a native currently looking to move, finding a rental can take months. Affordable? That’s a relative term and SF’s case you will be paying more than you would in any other city except maybe NY.

      • Taylor

        Yeah- I have completely adjusted my expectations for what “affordable” means. I moved to Nashville from NYC and, though that was several years ago, this is even more expensive than what I was seeing there. Thank you!

        • jefe68

          From what I understand time is a factor.
          If it was me I might be looking at some of the outlying neighborhoods with a BART connection, but BART is expensive as well. SF is going through a real change with all the tech companies driving up the cost of all rents.

    • StilllHere

      Oakland.

  • hennorama

    Remember too that the typical mortgage is now for a 30 year repayment period, rather than the 20 year repayment period that many older homeowners entered into when they purchase their first home.

    The lengthened payment period, combined with frequent refinancing, has turned many homeowners into users of revolving credit rather than a fixed repayment period.

  • http://hlb-engineering.us/ HLB

    There’s this huge negative stigma to living in your car. Why? Some folks in NYC live in RVs parked on the streets of the tony districts. Every day or so, they move or get ticketed. Turns it: it’s cheaper to just pay the tickets than to try to afford a place off the street.

    And that’s exactly what capitalism is all about: finding a way through the herd playing by the rules. What a great country we live in. Hand salute. Two.

    • nj_v2

      Lots of people essentially live on the road. A van or a little trailer or mobile home. Off ya go… No mortgage!

      • harverdphd

        Never happen.

  • http://hlb-engineering.us/ HLB

    You can always tell young people by their exuberance: Spring is here; jobs are coming back; I’m getting married in the morning; I believe in the ticker crawl at the bottom of the financial news shows; daffodils are in bloom!

    Ever serve in the US military, honey?

  • jefe68

    i hate to bust Celia’s bubble, but the bulk of the job growth is in the low paying service sector. The wages in this area is hardly enough to put food on the table let alone to begin to save for a home.

    • http://hlb-engineering.us/ HLB

      She’s too young to know better. Hoober Doober

    • Human2013

      I was thinking the same…Please don’t invite her back

    • harverdphd

      The 1% is a myth

      • Don_B1

        It certainly is a myth that the 1% are “job creators.”

  • Blue_To_Shoe

    Did anyone see the Western Middle Class income growth chart (by Country) on display about 3 days ago?
    The chart displayed at least 5 Nations and their respective economic growth patterns for ‘Middle class’ brackets.

    Countries, such as Canada (one of the Nation’s featured), had noticeable growth illustrated in the form of a bar graphs.

    The U.S. middle class was also on the graph; and the ONLY exception in terms of middle class income growth.
    The U.S. middle class growth was so low, It didn’t even show up on the chart as a ‘bar’ as did the other Nations!!

    U.S. growth was (0.3%), and was illustrated with a barest indication of a ‘line’ whereas the other nations had these long ‘bars’!!!!!!!!!

    Worst of all, If we’re honest, Americans did this to themselves: Americans, as soon as they think they have a little something, thinking that they are better than other Americans; going along with this ‘trickle-down’ stuff!!

  • Blue_To_Shoe

    All of this philosophical nonsense that some are calling in and saying…

    People aren’t buying homes because the 30 years of stagnant checks and ‘trickle-down’.

  • Erica Blair

    First the finance criminals from the NYC gangs, (e.g. Goldmun Sacks the sheeple) destroy the economy under the Cheney administration then these same crooked, evil lords of fraud continue their crimes as landlords by buying the homes that they’ve helped to wrest from their victims. I wish them a speedy journey to hell with the devil they worship…

    • twenty_niner

      And since 2008, those criminals have been well funded by the Obama administration with over $3 trillion in printed Monopoly bucks.

      • jimino

        Well what else would you expect from a Marxist, commie librul?

        • twenty_niner

          Not really accurate. More like: in way over his head.

          The calculus is that lowering interest rates to zero and flooding the market with printed money will force people into real assets such as real estate and equities, which will in turn spur animal spirits.

          In reality, we have unsustainable asset inflation. Rents are out of control. And when the punch bowl is removed or the next black swan shows up, there’s going to be a mad rush for the exits, and a lot of blood on the streets. Unfortunately, the poor guy just trying to make ends meet, is going to be left standing there, wondering “what happened?”.

        • Paul Gerrard

          Cheney?

  • Human2013

    Can someone tell me where our naysayers are today? Where are the Conservative trolls? Hmmmm….
    Can’t dispute the facts, is that it?

    • harverdphd

      Troll alert!

  • RealEstateCafe

    Tom Ashbrook’s last question points to something Susan Wachter did not have time to address in sufficient detail. Even the National Association of Realtors is concerned that “the Great Senior Sell-Off” is a potential threat to the housing market: For more information visit links:

    See Aging Baby Boomers and the Next Housing Crisis – The Atlantic Cities
    http://bit.ly/SrSellOff

    How the Housing Crisis Shafted the Next Generation
    http://bit.ly/HousingShaft

    Double bind: Will soaring rent burdens shrink baby boomer nest eggs / inheritance?

    http://bit.ly/RentBacklash

  • StilllHere

    Global cooling is negatively impacting real estate transactions, but pending sales went up in March. On Point does it again. Maybe you guys should stick to making up racism generalities.

    What does a stalled economy mean anyway? Are you expecting 0% GDP growth in the near-term because we haven’t been anywhere near there for awhile.

    • jimino

      0%? That would be good news, since in real terms it’s actually been negative for the majority of Americans for some time. Not having their income and assets decreased or lose value would be considered a sign of success for what used to be called the middle class.

      But that’s the business plan, right?

      • StilllHere

        It’s reported in real terms, not nominal. Stop making stuff up, it’s pathetic.

        • Paul Gerrard

          jimino is actually talking about real median wages, while you are talking about GDP. But really, 2 to 3% Real GDP growth is nothing to brag about — and could even be characterized as stalled. We need higher growth now, as we have seen in past recoveries.

  • nj_v2

    It was kind of in passing, but Tom A. mentioned something about a owning a home being an opportunity for regular folks to get their piece of capitalism. I’m no economist, but i’m pretty sure that a house isn’t capital, in the broader economic sense.

    • StilllHere

      Zzzzzzzzzzzzzzzzzzz

  • L Webster

    Living in the D.C. Metro area I see excess on a daily basis that makes me shake my head and the majority of other in the U.S. would have a hard time believing. Why wasn’t there any talk of the fact that people, in general, don’t save money anymore? Don’t tell me they can’t! At least not where I live. Every Starbuck’s and most $$$$ restaurants are full to capacity every day and night. Not to mention the malls. Students saddled with debt? Why weren’t the parents saving so they wouldn’t have to borrow for their education? Why did those same students absolutely, positively have to go to the most expensive schools? Then when they graduate they choose to live in the most expensive areas of the country. This is what I see everyday. If you want to buy a house do what your parents – scratch that- grandparents did, live modestly and save for it. In case you all are wondering, I am not a grandmother but a mother of two young children. My family lives within its means rather than the debt debilitating and soul sucking (huge house, crippling commute, before and aftercare) lifestyle of many of our peers.

    • Pam G.

      You are right on. I have been a realtor for 30 years in upscale towns in NJ and Boston. My husband and I bought a home out of college and renovated it. Today’s young buyers grew up in nice homes and expect that lifestyle to continue, causing me to show them 75 or more homes before they wake up or give up and rent. They go out to dinner most nights, no matter how many children they have. They own cars way too expensive for their income. They travel extensively, basically spend half the average monthly mortgage payment on entertainment and lifestyle. Many agents in Boston area no longer are willing to work with buyers, as they will not settle for less than the best, and look at housing for years.

      • Don_B1

        I do not doubt that you run into prospective buyers like those you describe.

        But I would also ask what slice of the middle class and upper class you see. You mentioned that you worked in “upscale towns.” I doubt you would see the same response from prospective buyers in “working class” towns; you probably just would not see that many with rental units being a much bigger percentage of the housing stock.

        Also, consider the invisibility (to the upper-middle-income and rich of those youth who have recently graduated from high school and maybe even college, but cannot find a decent-paying job. Even some of the youth who grew up in your upscale towns cannot get jobs that use the skills they have learned, and thus cannot afford what they would like.

        You might consider this:

        http://www.truth-out.org/opinion/item/23324-five-ways-american-policies-make-us-lonely-anxious-and-antisocial

        and when some of these “spoiled youth,” that have been talked about for some time as the failings of the “baby-boom” generation appeared in the failings of some of their more visible offspring. What you have said has been true of at least some slice of the offspring of middle-class Americans for a few decades, but it is not the case for all of those generations, and a large part of the youth is simply invisible to residents of upscale towns.

        Also, take a look at this and see the graphics:

        http://www.nytimes.com/2014/04/23/upshot/the-american-middle-class-is-no-longer-the-worlds-richest.html?_r=0

        Note that austerity policies so touted by the conservatives will do nothing to remedy this, as shown by the work of Thomas Piketty.

        • P. Shea

          Don….I agree with you. I left those high end towns for many reasons. I grew up with 5 siblings in a home smaller than two people feel they need today. But, even my buyers looking in lower priced towns, expect their first home to be as nice as their parents third home. I also have seen my daughters and their husbands struggle to afford the most basic housing within the greater Boston area. So I went back to school to get a master’s degree in Public Administration/Non-profits to work towards providing decent housing to all, especially those just starting out in life. My nephew got a law degree, but could not find a job. It took him two years to find one. In the Boston area, you are invisible to many people unless you graduate from Harvard or MIT. We need to begin to put people first, rather than money. I bought Piketty’s book, reading now! Best…

      • L Webster

        Yes, indeed. It is this same attitude that makes me crazy when I watch these house hunting reality shows. These couples that want everything in the house to be perfect make me want to throw my coffee cup at the TV screen.

  • pete18

    Great article ( The World’s Resources Aren’t Running Out ) on a related topic, which gets to the heart of the many disagreements over limited resources and the economy:

    “This disagreement goes to the heart of many current political issues and explains much about why people disagree about environmental policy. In the climate debate, for example, pessimists see a limit to the atmosphere’s capacity to cope with extra carbon dioxide without rapid warming. So a continuing increase in emissions if economic growth
    continues will eventually accelerate warming to dangerous rates. But optimists see economic growth leading to technological change that would result in the use of lower-carbon energy. That would allow warming to level off long before it does much harm.”

    http://online.wsj.com/news/articles/SB10001424052702304279904579517862612287156?mg=reno64-wsj

    • Fredlinskip

      Now if we could just get GOP to support some of this technological change, we might start getting somewhere.

  • Alchemical Reaction

    The issue has nothing to do with the rate of home-building. The REAL issue is the generation gap in aesthetic, lifestyle, and design preferences.

    The younger generation wants modern design. But home-builders are still building stick-frame, energy inefficient, ugly, classic tudor style coffins.

    If home builders brought more mid-century modern and prairie design, smaller home footprints, mixed use developments, as well as new technologies into their builds, there wouldn’t be such an over-abundance of unoccupied homes. This design problem will only get worse as boomers retire.

  • Sue Leroux

    It’s really not fair to judge someone who is exercising. I applaud their will to keep fit in the best way possible FOR THEM.

  • Sue Leroux

    That is so funny because that is what my husband always said. Now he’s a broker and he’s the only one who calls the market what it is — crap.

  • Alchemical Reaction

    I understand what you are saying and you have a point. What I am referring to with the high speed networks is the rate of doing business.
    If you hit the buy button and there is another network and computer capable of intercepting your purchase, purchasing the item first, and then offering it back to you at a higher price, those milliseconds translate to a business advantage.

  • Linda Nagle

    Yes, and these so-called INVESTORS are turning neighborhoods into trashy-rental properties. No pride. No upkeep. No ties to community. High rental turnovers. Can’t even pick up trash OR dog poop!!

  • Central Services

    Around here (not one of the hot spots) values have gone down in recent yrs but a lot of sellers aren’t willing (or can’t) come down accordingly. It also seems like a lot of potential sellers are lurking in the wings waiting for the first sign of significant uptick, at which time the market will be flooded with more listings keeping downward pressure on prices. Rents here are not high enough to make landlording very profitable, and there are still some tenants who try to get over on you for whatever they can.

  • P. Shea

    Jane….
    You obviously have not met me! As a realtor of 30 years, there is not an agent out there who would not tell you that I have been blowing the whistle on bad mortgage practices (ex-mortgage banker), exclusionary zoning that has created one of the most expensive markets in this country, Greater Boston, and many other bad things and people within the real estate industry. I worked with too many buyers who looked at me and ignored me when I told them over and over, “I would not buy now if I were you”. Many entities were responsible for the housing crash. I am finishing a master’s degree in Public Administration so I can work on public housing policies that support the 99% rather than the 1%. And revamp the real estate industry, and bring more integrity to it, as much as humanly possible.

  • ExcellentNews

    The elephant in the room for US housing is … the MIDDLE CLASS. Caught between wage squeeze (driven by job-outsourcing CEOs) and interest payment indenture (to consumer loans by predatory bankers) the US middle class is going the way of the spotted owl. TRILLIONS in wealth are flowing from Main Street into the offshore accounts of executives, bankers, and hedge fund managers. Hence, what’s happening to housing.

    The solution? But but but … if only we abolished the inheritance tax for these executives and bankers, they will be nice and bring back the money and create tons of jobs. Right? It must be true because Sarah Palin and George Bush (the Fourth, not the Third) said it. So, we can really speak of the ELEPHANT in the room.

  • andic_epipedon

    Thanks for having this discussion. The timing is good for us as our land lord is kicking us out so he can sell the house. Many of my initial questions have been answered by this discussion. My dilemma now is that it doesn’t seem that there is any clear benefit between home ownership and renting. I don’t want to live in an apartment and I don’t want to be kicked out again. We have great credit, but we don’t have 20% to put down. I also don’t want to have some Wall Street overlord that just twists the nail further into my coffin.

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Secretary of State Kerry to Israel. Obamacare back in the courts. Mourning as remains of Malaysia Flight 17 victims come home. Our weekly news roundtable goes behind the headlines.

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Jul 25, 2014
Guest Renee McLeod of Somerville, MA's Petsi pies shows off her wares. (Robin Lubbock / WBUR)

There is nothing more American than a piece of pie. We taste and talk pies.

 
Jul 25, 2014
Pallbearers carry a coffin out of a military transport plane during a ceremony to mark the return of the first bodies, of passengers and crew killed in the downing of Malaysia Airlines Flight 17, from Ukraine at Eindhoven military air base, Eindhoven, Netherlands, Wednesday, July 23, 2014. (AP)

Secretary of State Kerry to Israel. Obamacare back in the courts. Mourning as remains of Malaysia Flight 17 victims come home. Our weekly news roundtable goes behind the headlines.

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