The Five-Bedroom, Six-Figure Rootless Life

[Nbadan]

The Five-Bedroom, Six-Figure Rootless Life
By PETER T. KILBORN
Published: June 1, 2005


....As a subgroup, relos are economically homogenous, with midcareer incomes starting at $100,000 a year. Most are white. Some find the salaries and perks compensating; the developments that cater to them come with big houses, schools with top SAT scores, parks for youth sports and upscale shopping strips.

Others complain of stress and anomie. They have traded a home in one place for a job that could be anyplace. Relo children do not know a hometown; their parents do not know where their funerals will be. There is little in the way of small-town ties or big-city amenities - grandparents and cousins, longtime neighbors, vibrant boulevards, homegrown shops - that let roots sink in deep....

***

They are part of a larger development that researchers are finding: an increasing economic segregation. A Brookings Institution analysis of census data last year reported that the percentage of people living in affluent or poor suburbs in 50 metropolitan areas increased from 1980 to 2000, and the percentage living in middle-income areas declined.

Converging on these towns, relos have segregated themselves, less by the old barriers of race, religion and national origin than by age, family status, education and, especially, income. Families with incomes of $100,000 head for subdivisions built entirely of $300,000 houses; those earning $200,000 trade up to subdivisions of $500,000 houses. Isolated, segmented and stratified, these families are cut off from the single, the gay and the gray and, except for those tending them, anyone from lower classes....

The data is there, America is rapidly becoming a conglomeration of cities and towns with rich and poor segments, the middle-class increasingly being squeezed out. The distortions in the house pricing markets in most cities increasingly reflect the inequality of income distribution in the U.S.. What gets me is that I make a decent income, but after being a frivolous spender as a youth, I now try to live within my means, but I see my friends who make about the same I, buying these huge McMansions and driving Hummers and Mercedes.

One has to conclude that If real incomes haven't increased in the last 5 years (they haven't), what is really driving the economy is the extra income people are deriving from unrealistic rises in their home prices, and an increasing disparity in income distribution in the U.S thanks in large part to tax cuts we can not afford.

[mookie2001]

thats just what the liberal media would have you believe.



thats why i listen to sean hannity, he's so independent and underground, i get all my news from his show and i feel smarter and more important the average person.

[SWC Bonfire]

Imagine the gall of those people, not wanting to live in the getto...

I get your point, but you can't condemn the whole of humanity for wanting to live in a nicer neighborhood. It's human nature.


Families with incomes of $100,000 head for subdivisions built entirely of $300,000 houses; those earning $200,000 trade up to subdivisions of $500,000 houses.

I must be one house and land poor motherfucker if I have to make $200,000/year! BTW NbaDan, have you ever heard of The Millionaire Next Door/Millionaire Mind? These people who are living in these cookiecutter $300-$500k houses are not very likely to be destined to have true wealth. By true wealth, I mean a high net worth with valuable assets.

[mookie2001]

it's the increasing gap thats alarming

[Nbadan]

BTW NbaDan, have you ever heard of The Millionaire Next Door/Millionaire Mind? These people who are living in these cookiecutter $300-$500k houses are not very likely to be destined to have true wealth. By true wealth, I mean a high net worth with valuable assets.

With property values going up 5-15% per year, people are taking out these interest-only loans and cashing out on these houses before the principle payments kick in. 30% of the homes sold in the SA area last year were investor-owned homes, but this speculation has a snowball effect on the property values of those on fixed incomes. So, older folks take out equity loans on these inflated home values or they take out bridge loans and jump into the real estate game, inflating home prices even more.

The San Antonio area will not feel the full effects of the housing bubble bust as much as cities with over-priced property values on both coasts if only because Texas is still climbing out of the real estate bubble burst of the 80's oil bust, so home-values are still relatively modest compared to other parts of the country. There is a simple formula to figure out if your area is under the effects of the housing bubble - for most areas, rental values should be around 1,000 for every $100,000 in home value. If homes in your area are renting for more, you have a housing bubble problem.

[SWC Bonfire]

Interesting, Dan, where does that rule of thumb (1%) come from? Is it a byproduct of equivalent mortgage pmts?

And we'll see how liquid those assets are when the real estate market slows down. Extremely short term gains in the Real Estate market aren't my idea of sound investing, and I doubt if these people have hedged themselves in the event of a severe market downturn. If you're a developer, and you have the money, maybe it's different.

A lot of these people will get knocked off of their high horse if they don't plan for a rainy day. That will be equally if not more disasterous for the community as a whole, so hope that they only get burned slightly.

[NameDropper]

Rumor has it that home builders don't even want to build modest 3-4 bedroom homes or what most these days call "starter" homes. To me it is the high costs of new homes that is making being a "home owner" that much more difficult.

[RandomGuy]

The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households.[emphasis added] The response to the terrorist attacks of 11 September 2001 showed the remarkable resilience of the economy. The war in March/April 2003 between a US-led coalition and Iraq, and the subsequent occupation of Iraq, required major shifts in national resources to the military. The rise in GDP in 2004 was undergirded by substantial gains in labor productivity. The economy suffered from a sharp increase in energy prices in the second half of 2004. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups.

What left-wing think tank wrote this?
http://www.cia.gov/cia/publications/factbook/geos/us.html


You want to know what will abosolutely kill the housing market int he coming years? Oil. I will get that in my next post.

[RandomGuy]

Our nations dependence on oil will kill us in the coming 2-4 decades.
I remember seeing a price for 100 per barrel listed on Bloomberg news for 10 year oil futures. This is the markets best "guess" as to what the price of oil will be in 10 years, and indicates a 6.4% increase per year.
This will do two things:
1) Drive inflation. Oil/Energy prices are embedded in everything. Increase the cost of energy and you increase the cost of everything. For this reason energy cost increases are a large force in inflationary pressures.
2) Increase interest rates. Interest rates are directly tied to estimates of inflation. If energy prices alone go up by 6.4%, then you can bet your ass that interest rates will be at LEAST 3% higher, for the so-called risk free borrowers like the US Govt. The price that the rest of us pay will be higher than that.

This will put a huge damper on demand for new homes as interest rates will price a lot of new buyers out of the market. If you have a variable rate mortgage, get it fixed ASAFP.

[Nbadan]

Our nations dependence on oil will kill us in the coming 2-4 decades.
I remember seeing a price for 100 per barrel listed on Bloomberg news for 10 year oil futures. This is the markets best "guess" as to what the price of oil will be in 10 years, and indicates a 6.4% increase per year.
This will do two things:
1) Drive inflation. Oil/Energy prices are embedded in everything. Increase the cost of energy and you increase the cost of everything. For this reason energy cost increases are a large force in inflationary pressures.
2) Increase interest rates. Interest rates are directly tied to estimates of inflation. If energy prices alone go up by 6.4%, then you can bet your ass that interest rates will be at LEAST 3% higher, for the so-called risk free borrowers like the US Govt. The price that the rest of us pay will be higher than that.

This will put a huge damper on demand for new homes as interest rates will price a lot of new buyers out of the market. If you have a variable rate mortgage, get it fixed ASAFP.

Interesting. I think rising oil prices and inevitably, accompanying rising interest rates, will make the coming housing market slump much deeper, but I think what will be the catalyst to a regional collapse of the housing market will be the what I call the snow-ball effect, or housing prices rising to a point where stagnant real wages in the area can no longer support the rate of growth of housing prices. Home prices cannot keep going up at double digit rates, not with the rate of development of even newer homes, and more and more people unable to afford to purchase some of these monstrosities, sooner or later there has to be a correction.

[Stephen Patrick M.]

The woman described in the NYT article seems dissatisfied to some degree with her husband. After taking over the leadership role in the family, she wonders why her husband doesn't behave more like a family leader.

The husband apparently has no time to play tennis with the wife since he is working his butt off to pay for her tennis instructor.

The tennis instructor is probably screwing the wife since the husband is not at home to do that either. He is too busy working to pay for the maid because the wife is too tired from tennis ''lessons'' to vacuum.

The short-sighted husband is simply doing his part to maintain the illusion of a meaningful existence. This type of husband is just waiting to die of a heart attack before the age of 50. When that happens, the wife gets everything and marries some other sucker. C'est la vie. Hopefully for them, the afterlife is not a fairytale.

The rat race is a cruel joke played on those foolish enough to spend their short lives running it.

:pctoss

[violentkitten]

woe is me i make 120 large and dammit it is so awful

[RandomGuy]

Interesting. I think rising oil prices and inevitably, accompanying rising interest rates, will make the coming housing market slump much deeper, but I think what will be the catalyst to a regional collapse of the housing market will be the what I call the snow-ball effect, or housing prices rising to a point where stagnant real wages in the area can no longer support the rate of growth of housing prices. Home prices cannot keep going up at double digit rates, not with the rate of development of even newer homes, and more and more people unable to afford to purchase some of these monstrosities, sooner or later there has to be a correction.

By the by, for those of you who didn't do the math, that is 6.4% plus 3% will equal the "risk-free" rate of about 9.4%. That means that everbody else will be paying double digit rates, starting at about 12% or so, and going up with risk.

POP QUIZ:

(Q) If we have ballooned our overall government debt load with irresponsible budget deficits, when the time comes to refinance, care to guess where the cost of government borrowing will go? (hint: not down)

The government was paying 6% or so on debt financing, and will be paying 9% plus if we don't pay down that debt, the interest payments will go from 1/6th the federal budget to a much higher percentage.

Care to guess how the government will pay for that? You guessed it, all those happy fun GW tax cuts will be rolled back, and likely increased, as the government tries to fund Social Security and debt payments.

Thanks GW. :shootme

[Nbadan]

The government was paying 6% or so on debt financing, and will be paying 9% plus if we don't pay down that debt, the interest payments will go from 1/6th the federal budget to a much higher percentage.

Care to guess how the government will pay for that? You guessed it, all those happy fun GW tax cuts will be rolled back, and likely increased, as the government tries to fund Social Security and debt payments.

The general idea behind tax cuts is for economic growth, or what the government collects in over-all taxes, to grow faster than the rate of our debts when compared to our GDP, but there is little evidence that the Super-wealthy have chosen to invest their tax cuts in American entruprenuership since real wages for you and me have remained largely stagnant for the last 5 years - in fact, there is growing evidence that much of this money is now in China, India, and Indonesia being used to compete against American jobs and growth.

The Super-wealthy don't care about higher interest rates in the US since they rarely borrow and when they do, you can bet it will be written off of personal or business taxes, hell, since they own Citibank, Capital One, and Chase this only puts more money into their pockets. This is why passing the industry-written bankruptcy bill was so important before the housing collapse comes, in effect, making many Americans indentured servants to the banks for many years to come.

[Nbadan]

More interesting articles to read up on the current housing situation in the U.S...

*Home foreclosures surge—no housing boom for poor families in the US
By Naomi Sheehan Groce
13 June 2005


A little-reported aspect of the housing boom in the US is the corresponding surge in home foreclosures. Amidst a sharp rise in median housing prices, more and more Americans are finding themselves unable to meet monthly payments and are being forced into foreclosure. For many working class homeowners, the potential for financial catastrophe, including home foreclosure and personal bankruptcy, is one illness or missed paycheck away

(snip)

The housing sector is at present a principal prop of the US economy. Since 1999, the average price of existing homes has risen 48 percent. The 2005 median home price has soared to $206,000, 15.5 percent over the same period in 2004—the largest yearly increase since 1980. The Department of Housing and Urban Development listed 26 areas in the US where home prices have inflated by more than 20 percent, with half of those areas actually experiencing a doubling in market price. Meanwhile, employment and real wages have declined, creating a precarious situation for many American homeowners dependent on credit.

One much-touted force sustaining the housing market has been low mortgage interest rates—currently the fixed 30-year mortgage rate stands at a 45-year low of 5.56 percent. However, the rise in housing prices means that for many Americans even these low interest rates are difficult to meet. Many Americans have been hooked by financial firms pushing option adjustable rate mortgages, or option ARMs, which usually promise initially low interest rates that vary from month to month. Introductory rates can be as low as 2 percent, but if interest rates increase, those who have only made the minimum monthly payment face a bloated and sometimes insurmountable loan balance....

http://www.wsws.org/articles/2005/jun2005/home-j13.shtm...


*Playing Monopoly in Charm City
by Lila Rajiva
Dissident Voice, June 11, 2005


A powerful essay on faux American optimism and the house of cards that is the American housing market, told from the kind of first-hand experience most readers will resonate with all too well....

http://www.dissidentvoice.org/June05/Rajiva0610.htm


*Home Insecurity: How Widespread Appraisal Fraud Puts
Homeowners At Risk
March 15, 2005
By David Callahan
Demos Institute


Many Americans have reduced the equity in their home to pay off credit card debts and cover day-to-day expenses. More troubling still is evidence that many appraisers fraudulently inflate property values during the buying or refinancing of homes. This paper explores the implications of appraisal fraud.

http://www.demos.org/pub485.cfm


*A House of Cards
Refinancing The American Dream
January 9, 2005
By Javier Silva
Demos Institute


Since the refinancing boom began in 2001, American homeowners have cashed out over $330 billion in home equity to cover rising living expenses and credit card debt, putting at risk their most important asset - their home.

http://www.demos-usa.org/pub409.cfm


*Generation Broke: The Growth of Debt Among Young Americans
October 13, 2004
By Tamara Draut and Javier Silva


Average credit card debt among indebted young adults increased by 55 percent between 1992 and 2001, to $4,088 (2001 dollars).

The average credit card indebted young adult household now spends nearly 24 percent of its income on debt payments, four percentage points more, on average, than young adults did in 1992.

Among young adult households with incomes below $50,000 (2/3 of young households), nearly one in five with credit card debt is in debt hardship -- spending over 40 percent of their income servicing debt, including mortgages and student loans....

http://www.demos-usa.org/pub295.cfm


*Studies document housing disaster for millions in US
By Tim Tower
22 September 2003


Three recent studies have exposed a rapidly worsening housing crisis in the United States. Millions of families are living in substandard conditions, are homeless, or are making choices each day to spend money on housing and do without health care, child care, or other basic necessities. With virtually no affordable housing being built, the crisis can only intensify.....

http://www.wsws.org/articles/2003/sep2003/hsng-s22.shtm...

[Clandestino]

more people earn homes than ever before... only in nbadan's world is this a bad thing. and the interest only loans and arms and other things aren't bad... most people move every 5-7 years, so these type of loans are good for those types of people.