Goodbye, American Dream: The Unaffordability of American Life

My oldest sent me a text this past weekend:

Also houses down here are going for 1.5x value. [Friend] put an offer in at 200k for house selling for 160k and it ended up selling for 240k. There’s no way it’ll appraise that high but EVERY house is selling like that.

Folks in big coastal metro areas will laugh at these prices, but until recently $160,000 bought a 900-1200 square foot home, three bedrooms and two bathrooms, a basement and a two-car garage in a suburban setting here in Michigan. At this price one wouldn’t find a brand new home but one between 10 to 50 years old, with a medium sized suburban lot. If one was really lucky, the house would be move-in ready, the yard would be fenced, and there might be a shed in the backyard for the lawn mower.

A young professional earning $80 to $100,000 a year could afford this and a family and still have a tiny bit left over to put in retirement savings.

But it’s a stretch at $200,000, and absolutely out of their range at $240,000. They may not even have the 20-25% down payment for this larger price, and the housing market has tightened so quickly they certainly haven’t been able to come up with an additional $20 to $40,000 to put down.

Wall Street Journal reported last week that as much as a third of single-family residential housing is now being snapped up by investors.

Big foreign investment firms that buy office buildings, hotels and shopping centers around the world have a new favorite real-estate play: single-family homes in American suburbs.

These institutions are partnering with U.S. housing companies to buy or build rental homes by the thousands. In suburban neighborhoods near cities such as Atlanta, Las Vegas and Phoenix, blocks of families are sending monthly rent checks to ventures backed by Canadian pension funds, European insurers, and Asian or Middle Eastern government-run funds.

The overseas investors are following in the footsteps of many big U.S. investment firms and pension funds, which started buying single-family homes on a large scale in the aftermath of the financial crisis.

This may well explain the huge jump in prices over the last 12-18 months.

The situation is so bad it’s become a joke on TikTok and Twitter:

Speculation is doing to residential property what it did to oil prices before June 2008 when Congress passed legislation requiring an increase from 10% to 30% margin on options. Oil prices then dropped greatly, but not enough fast enough to prevent economic Jenga – many mortgages failed because homeowners had to choose between a tank of gas to get to work or making their house payment.

~ ~ ~

Now imagine the frustration of a prospective house buyer like [Friend] above. They’re a two-career household with a small family, which means they have car payments, childcare expenses which likely exceed car payments, and student loans they’ll be paying down for at least another decade if they are trying to juggle all these expenses.

They’ve scrimped and saved, kept their lifestyle minimal – not hard to do if you’ve had to weigh going to the movies on a date night against the cost of a babysitter and movie tickets – and they’ve amassed enough cash to put down 20% on a house and been pre-approved for a mortgage between $120,000 and $160,000. The higher end would be a push for them but sometimes the right house is a little pricier.

And then the dream for which they’ve scrimped and saved is gone in a heartbeat. As soon as they see the house on market they bid but they couldn’t counteroffer enough money fast enough and it’s gone.

Even in a pandemic with so many people out of work, the right house is gone.

It’s probably been sold to a speculator who will put it up for rent at a price which is the same as [Friend]’s mortgage payment would have been, but at that price there’s no room to save any extra money.

And that’s what it’s like in the Midwest. What’s it like in more densely-populated coastal states?

How do young people who are competing for jobs on a national basis, earning pay which doesn’t adjust all that much for location, buy a home and attain the American Dream?

They’re giving up children to do this, we can see that by the flat to falling birth rates.

A major one. The National Bureau of Economic Research says that the largest component of child-rearing costs is housing. And the cost of housing in America has skyrocketed. The median U.S. home in 1953 cost $18,080, or about $177,000 in today’s inflation-adjusted dollars. Today, the median home price is $301,000. Young people who cannot afford homes or even a two-bedroom apartment are less inclined to marry and to have children. One 2014 study published in the Journal of Public Economics explicitly linked housing costs to fertility, suggesting that for every $10,000 jump in housing values, fertility among nonowners fell 2.4 percent. Economists also point to the fact that the fertility rate has fallen every year since 2007, and suggest that the Great Recession compelled many Millennials to put off child-rearing for years. “What we learned from the Great Recession is that every 1 percentage point increase in the unemployment rate reduces births by 1 percent,” said Wellesley College economics professor Phil Levine.

And in places like the greater San Francisco area they go homeless, living in their vehicles because they can’t afford rent *if* there’s rental housing available.

~ ~ ~

One solution to this mess is reducing student loan burdens. Getting tens of millions of young people out from underneath $50,000 and a decade or more of payments would free them to have children and/or buy a home.

I hesitate to say they may also save for retirement but it’s possible they’re not able to until they are out from under their student loans.

This problem may explain why so many young people have jumped at online trading apps like Robinhood, causing increased volatility in the stock market. They can get in with very little money, get out quickly, and do it all over again rapidly. It offers them a chance to increase their asset value though it does nothing for the overall stock market while compromising their personal data privacy.

But putting some portion of their meager savings in the stock market isn’t a solution — it’s far too risky, too easily gamed (hah, GameStop, get it?). It’s not a prudent approach to funding necessities.

Getting out from under student loan debt, though, would be a doable help with very little downside.

~ ~ ~

Removing at least part of student loan debt from younger consumers’ shoulders will act as an economic stimulus, too. Those who are able to end their loan payments will be able to spend more of their income on expenses they’ve deferred in addition to housing.

Employment should rise as demand increases, and a tighter employment market will help boost some if not all wages.

Which brings us to the section of the market which may not benefit directly from canceling student debt. Workers who make minimum wage or are employed in tipped hourly jobs can’t afford to buy the average home in the U.S.; they are struggling to pay rent let alone save a down payment. Many of them are students.

Do the math:

Minimum federal wage $7.25  x  40 hour week  x  52 weeks  =  $15,080 a year.

That’s nowhere near enough to make a payment on the median home priced at $301,000. It’s not enough for a tiny dump of a house at one-third of median price.

The equation above already contains numerous generous assumptions: the employee makes 1) minimum federal wage, 2) at a full-time job, 3) for the entire year. For most minimum wage workers, at least one of these three points doesn’t apply. Most employers who hire minimum wage workers avoid paying unemployment taxes by employing workers less than full time, which means a minimum wage worker must work two jobs (or more) to make $15,080.

Forget about it if the worker holds down a tipped hourly job; while in some cases tips can be quite good, the base wage in at least 16 states is $2.13 an hour. On a bad day it may cost a worker more to show up than they make if they pay for any form of transportation besides shoe leather or a bicycle.

The minimum wage must be raised if roughly 1.8 million Americans have any chance at saving a down payment on a house, let alone buying one. And if businesses aren’t already increasing wages now during pandemic market conditions, they’re not likely to do so unless they’re forced to by law.

~ ~ ~

Canceling a big chunk of student loan debt and raising the minimum wage will still not be enough to help tens of millions of Americans afford to buy their own home.

Once these folks have more disposable income and increase demand on the housing market, speculators will swamp the market even more so than they are right now.

(Domestic policy aside, it’s a marvelous way to ratchet up class conflict by locking out a couple generations of potential homebuyers if a hostile country’s sovereign fund was looking to both invest and destabilize the U.S. at the same time.)

Canada’s domestic housing policy encourages home owner occupancy of single family homes; speculative investment is far less than it is in the U.S. It hasn’t solved their housing market problems — Toronto housing is incredibly expensive — but it does reduce competition for homes.

There must be some form of legislation which reduces market demand by speculators so that the only participants in the single-family home market are single families.

There should be some limitation on speculation for multi-family housing so that rental properties remain affordable. Eliminating overseas buyers or funds is one possibility.

~ ~ ~

We’ll hear all kinds of caterwauling about how unfair it is that some students will have all their debt paid for them by canceling $50,000  while they had to pay for all their student’s education.

Bah. They can suck it up.

This month I finished shelling out a total of $200,000 for two kids to go to college. This doesn’t include what I’ve paid for their cell phone, health care insurance, and for the vehicles and auto insurance they’ve needed.

$200K covered tuition, books, fees and some of the housing and food for one kid on a half ride to a private school, and a kid at a Big 10 public university. Both kids worked throughout their four-year programs and paid for their own gasoline and rent off campus, along with some sundries.

Because of this investment in them I’ve got to come up with income for another seven-plus years to pay for my health care, but at least my kids have a fighting chance right now that most of their cohort don’t have. They don’t need to live at home with me to scrimp and save. They can move out out state and chase a better job.

But even with this investment in both of my kids it will take years for them to save enough to make a down payment on a home and have a 6-month cushion in the bank.

I don’t resent the fact they don’t have school loans which might be canceled. What I resent is that they don’t have the kind of world I had as a young adult, where if one worked hard they could make enough money to get ahead and expect a better life. (I do resent having to pay through the nose, five to ten times over what I paid for college, but that’s another matter.)

If housing prices jump 20-60% almost overnight, my kids don’t have that chance. They can’t expect their friends to uniformly have that chance, either, as [Friend]’s situation demonstrates.

If their entire cohort is stifled by student loan debt, wages stagnant for decades, and competition for housing from speculation, even steep parental investment isn’t enough to help them tread water.

And if all of their cohort of 20-somethings are stuck in the same boat, the entire economy is deeply skewed and screwed. Whatever assessment analysts are making of the stock market and the economy is manipulated by this iceberg of frozen, frustrated demand which cannot remain in stasis forever.

Something has to give.

We can start with canceling $50,000 student debt, increasing the minimum wage to $15 an hour, and eliminating overseas speculation from the housing market while limiting single-family homes to sales between occupants and their heirs.

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91 replies
  1. Rayne says:

    I didn’t even mention Sen. Warren taking on the corrupt and broken student loan system:
    https://finance.yahoo.com/news/senator-warren-student-loans-153037171.html

    Nor did I mention Sen. Warnock’s concerns about lenders and appraisals of Black-owned property or property Black Americans want to purchase.
    https://twitter.com/SenatorWarnock/status/1383131945412988928

    The entire system is rigged and in such a way that it keeps at least two generations of Americans down.

    • posaune says:

      Rayne, Thanks for this post and for your ideas — I agree wholeheartedly. I’m appalled at what’s happened to housing prices during the pandemic. I support the student loan forgiveness, BUT: I think your idea of limiting the house-buying pool (excluding investors or foreign entities) MUST happen simultaneously. Otherwise, it will be like what happened when they increased the amounts of student loans from $5K to $8K: overnight, tuition jumped $3K and more! When I started in grad school (NYC) tuition was $9,500/yr. By the time I finished (6 years) it was $19,900. Unconscionable greed! If young graduates get a $50K student loan break, developers and REITs will soak it up completely if unrestrained.

      • posaune says:

        I always thought the 2008 meltdown transformed into an intentionally designed land grab. HARP was a joke. Hardly anyone was helped by it; no bank or mortgage outfit would help those with fraudulently signed mortgages. And it offered REITs the opportunity to craft new vehicles for absorbing a litter of SFHs. Although housing prices were deflated for a while, the price climb started again to the point where, in East Coast cities, a young graduate was dependent on parents to make the rent even in roommate shares for new “luxury” apartments. And developers were pricing the products with that in mind. (Middle class wealth grab).

        I sat in some “confidential” developer planning meetings regarding unit-type mix decisions, and believe me, the marketing demographic information they acquire is mind- boggling! They have types and subtypes: Single, 40yo male/ dinks with a dog / couple with one kid / 55’s with big house in the suburbs looking for condo, etc. And the units are designed for the numerous demographic profiles: i.e., the dinks with the dog want the maroon granite counter and the grey cove base, blue carpet, etc.

        They have it all priced out down to the door hardware and shade pulls and show in hardline what the profit will be long before they even secure land use approvals from the local planning agency. (One reason they fight so hard against ANY reduction in unit yield!). Now this is for new development, but I’m sure that the REITs resellers have just as sharp pencils!

      • Rayne says:

        Au contraire — I think the halt on speculative investment by foreign buyers or overseas money should happen IMMEDIATELY because home buyers who are out from under student loans are already affected.

        But thanks for sharing your experience with tuition hikes, good example of how the feedback works.

    • harpie says:

      WARREN:
      https://twitter.com/SenWarren/status/1384944398513971204
      2:57 PM · Apr 21, 2021

      Instead of just complaining on TV, I invited Leon Cooperman to come to the Senate to make his case for why billionaires like him shouldn’t pay a wealth tax. We should have a public discussion on our rigged tax system. I’ll still use the hearing to do that. [link]

      >>> Leon Cooperman declines Elizabeth Warren invite to testify at Senate hearing on taxes [CNBC] [hahahahaha! the chickenshit]

      I think this is the Hearing she’s talking about:
      Creating Opportunity Through a Fairer Tax System
      https://www.finance.senate.gov/hearings/creating-opportunity-through-a-fairer-tax-system

      • Raven Eye says:

        Billionaires. I just was reading something that attributed to Joseph Conrad a comment that millionaires (adjust for inflation to get billionaires) are the “real anarchists”. But probably not your commune/libertarian anarchists, nor your blow-up-the-parliament anarchists.

        When I think of how our current crop of billionaires look at governance in America, and then think about them getting deeper and deeper into housing, I get a little uncomfortable.

  2. dude says:

    At the university where I work (in Facilities, not faculty), we see a growing divide among colleges and universities which could even be “affordable” with $50,000 loan. Even the public colleges and universities who report and depend upon their own State taxpayers are clearly becoming unaffordable as they try to compete for the same dollars being spent by a smaller number of students entering the system. The dog-and-pony shows all institutions put on to recruit are becoming increasingly desperate. The private schools are not immune and many are struggling while the name-brand ones , being well-endowed, turn away droves of students who are able to pay. There are not enough of them to trickle down to the less expensive institutions and pay there way where millions are being spent on campus improvements and faculty to compete with them more notable brands. $50,000 is not enough for two semesters’ mere tuition at a public or ‘private’ Ivy-caliber school, and it might be barely enough for two years’ Cost of Attendance at some state-run institutions in my state. So, $50,000 debt forgiveness would be a welcome start for many, many students; however, the gap between what an sells for education and what they can afford is rapidly widening.

    We expect to see a rebirth coming (in our state) in 2 yr programs at community colleges. We expect to see a marked decline in attendance at 4 yr universities.

  3. P J Evans says:

    I hate investor-owned housing. It’s always out of reach to buy, and renting is not an improvement. So many banks and REIs think it’s great – and maybe it is, if you have money to burn.

    • Rugger9 says:

      Investor owners are also notorious for badly insensitive behavior and abuse of tenants. That and being slumlords, generally like Kushner Industries was busted for in Baltimore IIRC.

    • Frank Anon says:

      Investor owned single family homes work for very few people. Maintenance budgets are non-existent, the fund extracts deductions from depreciation, they don’t have a SALT tax limit (where applicable) because the taxes are a business deduction and not a personal deduction, but they always have plenty of money for aggressive evictions. Its gotten cheaper to throw up a thousand single family homes than it is to build a 1000 apartments, mostly due to multifamily zoned land being either gone, or informally banned by local action/inaction. Single family homes are always as-of-right, a cheap prefab goes up in no time, for as little as $50 a foot, and you never will have tenant action by common complaint.
      These neighborhoods (one is going up near Baton Rouge LA, apparently, with 5,000 new houses) will suffer from transitory residence, steady erosion of quality and other faults. Then, be assured, they will be sold off in a predatory fashion – likely to disadvantaged groups – when the pendulum swings away from support. Current SFH rentals do not have positive outcomes, the explosion will make it worse, especially when these homes go into the market in the future

  4. rosalind says:

    visiting a friend in Palo Alto, CA (heart of Silicon Valley), as we stood in front of her home on what i’d term an avergage street w/modest sized homes not yet bulldozed and supersized, she started pointing out houses “that one’s empty, that one, that one”. she explained it was all foreign money, and they leave the houses empty. i was – and remain – outraged. i don’t know the answer to this one.

    in my PacNW town the lack of housing stock & few available buildable lots paired we people moving out of Seattle to other parts of the State has resulted in huge year to year single family home sales price increases, with no end in sight. it’s the “all cash” folk bidding up and snagging the homes.

    in Seattle itself one current summary says “The median price of single-family homes increased by 9.24% to $798,000. The median price of condos decreased by 1.29% to $475,000.”

    me i’m just freakin’ grateful i managed to buy my condo right before the prices started to spike.

    • Rayne says:

      The situation motivates activists who want more multi-family dwellings in single-family areas. I ran into someone from Seattle area who was insistent that the older catalog homes — like the charming bungalows built from kits sold by Sears or Montgomery Ward between 1910-1950 — should be replaced by multi-family dwellings. “They’re not unique to the Pacific Northwest, they’re not worth preserving! We need housing!” The owners of the empty housing can afford to fight this guy off, but the folks who’ve been occupying single-family homes may not be able to do so. And if these older homes are forced to yield to multi-family, will these investors from overseas step in and muck things up even further while destroying the appeal of established neighborhoods?

      Ugh. What a mess. Glad you’ve got your condo.

    • punaise says:

      We’ve had clients who pay upwards of $2.5m for ho-hum ranch house tear-downs in Palo Alto. There are jarring economic disparities literally within blocks (Atherton – parts of Redwood City, Palo Alto – East Palo Alto…)

      Something is seriously out of whack.

      • bmaz says:

        I want $2.5 mil for my ranch house to be torn down! And am accepting offers in that range. Location, location, location!

          • bmaz says:

            Dollars. There was a dollar sign in there!

            Funny story, once back in 2007 or so, give or take, I was working on a car out in our garage, which has a screen door out to one side of our house. About 9pm I think and some dude was knocking on the door to that part of the house. I asked him who he was and what he wanted (fully expecting he was a process server wanting one of my clients). Nope, he said he was working for investors that wanted to buy our house for cash without realtors. The offer was seriously huge, but we were comfy and never thought any crash would really hit “this neighborhood”, so I told him to get lost. Took a while, but then the crash really did hit “this neighborhood”. It got ugly for a bit, and I almost regretted it. But things are pretty good and valuable again now. We just like it here and don’t want to move.

              • bmaz says:

                And you have to actually move. We have a lot of crap, it is not easy to move. But it is mostly that location thing. I need (except in the pandemic I guess) to get all over the valley here.

                We are in a pretty place where that is easy to get most anywhere from. And you can’t find any housing analogue anywhere near here for twice the price/rent. Expect to be an ever older codger right here for a while.

                • punaise says:

                  Similar here. They wheel us out feet first.
                  “Help! I’ve fallen upwards and I can’t get out!” :~)

  5. Silly but True says:

    Part of the problem is that municipalities are lax on regulating their land zoned for “residential – single-family dwelling” in not being used primarily for commercial purpose that includes rental property, even if the commercial property also happens to be able to be used as single-family dwelling by a single family renting it.

    But then municipalities have also been lax in holding banks accountable for taxes owed on repossessed properties owned by bank when mortgage holders defaulted.

    • P J Evans says:

      Lenders also would rather have people default and be forced out than make a deal that might reduce their own income for a while. (In the Bush43 recession, the people defaulting were sometimes those who could pay, but chose to walk away, while people who were having trouble were the ones who wanted to make deals and stay.)

    • Raven Eye says:

      Municipalities can be a special challenge. The city I live in was incorporated in the 1890s and has a population around 1,300. A look on the satellite view shows some undeveloped land in the city — in a county with a pre-existing housing shortage, made worse last September when three simultaneous fires fire destroyed over 2400 homes and 170 businesses. That’s a heck of a housing vacuum that someone (plural) will be trying to fill. Naturally, lower-wage earners were disproportionately impacted.

      I’m sure that words “public-private partnership” have been uttered. Day-to-day challenges for the handful of paid city staff, and I don’t know who can protect the city’s interests against financial predators.

  6. Philip Munger says:

    I left Seattle for small town life in Alaska almost 50 years ago, when I thought Seattle was getting too crowded. My ex-wife and I managed to raise two kids, putting them through state colleges in Washington and California. Like a lot of Alaska kids, after school, they didn’t come back up north to live. They’ve embarked on careers in the states they went to college in. Although they cannot afford big houses in Seattle or Arcata, they are satisfied with their lot. My daughter is a scientist, my son a successful cannabis farmer, with businesses now in rural California, and New Mexico, where he has succeeded in getting in on the ground floor of their legalization regime.

    Most of my siblings’ kids are successful after college all over the country, with only those who pursued doctorates or medical school being deep in debt.

    It is hard for me to relate to the troubles of urban life in 2021 USA, as I felt I saw that coming fifty years ago, when I chose to avoid any possibility of having to embark on a career dictated by urban professions.

    My biggest fear has always been of being trapped in the city for the rest of my life.

    • Rayne says:

      You’re an exception now, Phil. I also need to point out that many of the young people who are struggling with school loan debt may be the first generation in their family in college, and/or the first in their family who needed to borrow to pay for school. When I was in college paying for school with minimum wage jobs was possible while still making rent, paying for transportation, food, so on. Today after a decade-plus of stagnant wages, it’s virtually impossible. Over the last 20 years:

      The average tuition and fees at private National Universities have jumped 144%.
      Out-of-state tuition and fees at public National Universities have risen 165%.
      In-state tuition and fees at public National Universities have grown the most, increasing 212%.

      [source: https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities%5D

      And it’s also not urban life I’m talking about. I went looking at property to rent in Michigan’s Upper Peninsula for the summer and the price has jumped dramatically while availability has collapsed. The only things left on the market were in the million-plus range.

      • Lex says:

        The UP has become a getaway refuge. People who’ve never visited or maybe just once are buying property unseen on a regular basis. In the last three years the plates seen in the summer are heavily NY, Iowa, PA, OH and the more normal tourist plates. Marquette is a zoo all summer long. We probably have hotel occupancy equal to the full time population now and they’re all full all summer.

    • punaise says:

      Hola, Phil!
      punaisette (soon to be an attorney) and Dr. Mr. punaisette (MD) could probably make it work in the SF Bay Area in the long run, after significant post-grad debts are paid off. But they may just as well settle elsewhere (the other CA) for lower cost of living. If two professional “haves” struggle with that calculus, that’s a pretty stinging indictment of economic viability for the have-nots and those in between.

  7. Leoghann says:

    When I moved to central Arizona right after Christmas 2014, the price of a 1,000-2,000 s.f. home was $75-$90/s.f. I was told often about how the housing market was still suffering badly from the burst of the real-estate bubble in 2008-2009–surprising, since housing in the DFW area and North Texas in general was going for 50%-60% of that. Rents were considerably higher than house payments. A 1.500 s.f. house that would sell for $90,000 garnered monthly rent of about $1,100. Today, those selling prices have doubled, and in the mountainous city in the area, with the history and the views, nicer houses are selling for $200-$300/s.f. I have several friends who have been forced out of affordable houses because of refusal to renew leases (so the investor could drastically increase the rent), and have had to settle for considerably smaller homes, apartments, or mobile homes that their families could barely fit into. The poor families are having to move into the homes of friends or relatives, because it takes two families’ incomes to make the rent. The prices in the hamlets in the far reaches of the county are more affordable, but there are few stick-built houses there, and the commutes are 20-50 miles, which adds a considerable amount to their expenses.

    Another problem, which Rugger alluded to, is that these investors, which here are typically people or firms headquartered in California, are uninvolved, and have no incentive to keep the property up. In nearly every neighborhood without a strict HOA, you can spot the investor-owned housing, because of all the visible deferred maintenance–old, damaged paint, yards full of weeds and dead landscaping, and defective roofing. This also lowers the property values of owner-occupants in some cases.

    • Rugger9 says:

      There is also another insidious effect of the tsunami of investor cash skewing the market. Unlike CA where I live (Proposition 13) most states assess property values on the prevailing market and when property taxes are assessed (not every state and/or locality has one) the basis is the then-current value and it is not unknown to have people priced out of their homes due to the tax load.

      Proposition 13 was allegedly intended to stop that and for a residential place like mine the basis is the purchase price with a 2% per year rise in that basis or market value, whichever is less, and in Santa Clara county the tax is about 1% of that number, more or less. It also put in place a bunch of restrictions on new taxes (specific ones are 2/3 vote, general ones majority which has led to 2-step tax proposals where a general tax is authorized in combination with another proposal defining how the tax increase will be spent) as well as budget passage limits (originally 2/3, since watered down somewhat). Since I bought my townhouse 30 years ago, my taxes are quite reasonable, but my house value has gone up 5X if one believes Zillow. My neighbor has a mirror image townhouse and his taxes are at least 2-3X of mine solely because of when he bought his place.

      We also have in the Bay Area a plague of campers and RVs to the point where cities like Palo Alto are trying to run them out of town.

      • posaune says:

        DC is getting more expensive by the day it seems. And personal income tax is 10%. RE tax is more reasonable, though, and goes to 1/2 rate at age 65.

  8. jaango says:

    When it comes to today’s reality versus tomorrow’s reality, the pending demographics over the next twenty years, does not address the ‘cost’ of attending college, and ultimately, this cost being passed on to the either parents or grandparents, has become apparent, when today’s continuing white privilege is taken into consideration.
    And having grown up in a farmworker family, I am reminded that our “curtains of cobwebs” hasn’t much changed since the overall farmworker mindset, is not on college attendance but on the Pragmatism Coalition, (and still known as the Chicano Movement) for implementing our wide ranging future capacity that subsidizes our search for the Unassailable Fact and equally importanc for Common Sense. Take, for example, the geographical movement or migration, is just another fact or life. And for me, this behavior was my migration from the farmworker environment and into the military service, of and for a short few years. And thereafter, my college career, despite my access to the G.I. Bill and followed by my desperate search for additional monies to complete my ‘formal’ education, was and had been a daily ‘given.’
    Consequently, the elimination of the military draft in the 1980s and the “trickle down economics” adopted by the Boomer Generation, is just another follow-on behavior for rejecting the Unassailable Fact and Common Sense, that should have been understood and sufficed. Thus,I was pleasantly surprised with latest screed by Chris Hedges in his ‘demise’ of emperial behavior, as published at the salon.com website.
    And over these many years or since 1985, the Academic-Military Draft, being implemented, as a three-year duration, each enlistee would have achieved the left-handed heft of an Honorable Discharge and in the right hand, holding the two-year college degree or the Associate Arts Degree in General Studies, would have effectively demonstrated our Sombrere History for “hard work, self-discipline and ambition,” would have been widely recognized, again for the unassailable fact and common sense. And inevitably, college recruiters, would standing 10-person deep in line for delivering the college/university’s view of white priviledge. And as such, these institutions, would be having to reduce their overall cost relative to military vet attendance.
    Of course, today’s perspective would consist of the front line police officer not having to carry a gun, given that the owerwhelming majority of thes police officers would carry their wide ranging degrees in the Humanities. Of course, these police officers would have to have their salaries doubled, at a minimum. And yet, the SWAT vehicle would be parked down the street while awaiting for ‘the call.’
    And in closing, the “curtains of cobwebs” would be easily replaced into today’s toxic politics of neo-liberal politics, being practiced by both the Republicans and Democrats, writ large.

  9. harpie says:

    CONGRATULATIONS on the end-of-undergrad-payments-day, Rayne!
    [I remember well what that accomplishment feels like.]

    • Rayne says:

      Thanks, harpie. I wish I felt relief but it feels more like I’m waiting for the next shoe to drop. Probably doesn’t help that I’m navigating the wilds of the ACA health care system for the first time following COBRA and the monthly payments are wretched.

  10. Greg Hunter says:

    There is a lot to unpack but I will skip to the real reason for the decline in prosperity for much of the middle class – cheap excess energy is no longer as cheap as it once was, but our financial system has been managed to borrow to cover that loss of prosperity. Whale oil to fuel oil led to one long party that humans are getting ready to pay the costs on while the population swells beyond our means to maintain an American lifestyle that everyone on the planet wants, but this planet cannot give.

    Limits to growth was correct and so we are coming up against a predicament that cannot be solved but can be mitigated; however how money is tied to faith and not the real bringer of prosperity, excess and “cheap” energy.

    Dr. Timothy Morgon is my main man for all things related to economics and he starts out his latest post with the man whom helped use this excess energy and helped build the middle class – Henry Ford.

    Until humans understand this punchline, we are going to be in for a great deal of strife and whining…..

    “Unless you understand the economy as an energy system, though, you couldn’t – and still can’t – see what’s happening.”

    https://surplusenergyeconomics.wordpress.com/2021/04/20/195-the-unrelenting-squeeze/

    Just like here….the comments are good and discuss the housing issue.

  11. Wm. Boyce says:

    I feel for your children’s situation. The financialization of everything has been largely realized. The medical system, education, and especially since 2008, the real estate market. Large pools of money roam the land seeking return and crushing everyone beneath mountains of debt.
    This is one of the legacies of Reagan’s era, when deregulation and tax cuts began the formation of large pools of money seeking return. It’s taken 40 years, but it needs addressing, or the majority will not only not live as well as their parents, they’ll have a hell of a time making it, if they aren’t already.

    • Rayne says:

      With the collapse of fossil fuel prices in 2008 and again in 2014, money has been chasing a sure thing. Bonds yield jack shit right now. So those “large pools of money” chase everything else not nailed down. We’re going to need to creates new investment opportunities or those pools will do what they did in 2016: buy a presidency (hello, Mercers).

      • earlofhuntingdon says:

        Exactly. Plus, the wealth gap is significantly greater now than only a few years ago, and the pools of stateless capital seeking ever higher returns are global.

        Housing prices in the UK and the Netherlands, for example, are rapidly going up despite the pandemic and for similar reasons you cite for the US. One big difference affecting the consequences of that is that the Dutch, and less so for the Brits, have substantial social safety nets of the kind that Neoliberals in the US have gutted.

        • timbo says:

          I note the juxtaposition of the homeless citizen vs stateless capital in terms of investment policy here… just a thought about how folks who are unable to find employment because they don’t have a place that is a fixed address are now vying with the need of capital to find sure-thing investments in the US economy. This is all driven by policy in simple and complex ways. Our country transitioned away from a higher interest rate mortgage system with better tax deductions for paying off loan debt to less tax breaks there but much lower interest rates. But what else can be tweaked to get us to a better place for the average person?

          I doubt that forgiving college loan debts will do it unless there’s a drop in the cost of tuition. Forgiving loan debt is more likely to drive real estate prices even higher than they are not, at least theoretically if supply and demand is still driving the real estate home markets? If real estate prices continue to rise then, theoretically, rent prices should also rise too…

          • earlofhuntingdon says:

            Forgiving student loan debt – without tax consequences for the debtor – would be a major boost to the economy. It would also redirect money from the non-productive FIRE sector to the real economy. That’s exactly what’s needed to help it recover from the pandemic. But, yes, higher education funding generally needs to be revamped, for a host of reasons.

            • timbo says:

              They >might be< a huge boost to the economy. They certainly would be good for those who took the risk of taking out those loans and are burdened by the usurious private sector education loans for sure.

              My speculation with regard to the real estate market is that, if lending rates stayed low, that all it might do, forgiving the school loans, is drive the price of homes even higher than they are now. That doesn't mean that I'm opposed to forgiving those loans, just that I take issue with the surety of some that forgiving those loans would somehow solve some significant problem of rising rent and real estate costs if current US lending rates and future market conditions remain relatively similar to the current ones.

    • Old Antarctic Explorer says:

      In a similar vein, several months ago I read a blog about a comparison of the wealth of nations. The author, a Brit, noticed that the UK was near the top while Germany was way down around the middle. He couldn’t believe it; Germany, a high wage country and the number one or two exporter in the world (it vies with China each year) NOT a wealthy country? How could that be? A little digging showed that “wealth” in this listing meant private wealth, not public wealth. So Germany, with still functioning public transportation systems, public housing, public colleges, all the way through PhD, public parks, etc didn’t measure up to a Thatcherized UK where the trains, mines and public housing were all sold off to private interests.

      France is much the same as Germany. A website I looked at a year or so ago was touting the inexpensive housing in France. Their pitch to Americans and Brits was to “rent your house, move to France, buy or rent here and live on the difference.”

      For Conservatives, I think this is the primary reason they want to privatize everything and get government out of any services for ordinary people: it means that private capital will end up with all the goods and services and can charge whatever they want.

      • Wm. Boyce says:

        The same dynamic is wrecking American businesses. “Corporate raiders” buy perfectly good companies, load them up w/debt, and then drive them upon the shoals of bankruptcy to profit mightily.
        Capitalism is eating itself in this country and we need to recognize the sickness of the system, as Richard Wolff might put it.

        • Rugger9 says:

          Even a company like Sears wasn’t safe from these raiders. Fundamentally, it’s the tax code that encourages this behavior so the best place to fix it IMHO is there, by removing the incentives relative to personal ownership or to write off speculative losses (the carry forward provision).

          The other thing is to tax stock transactions at the 0.001% level (which is sufficient for the purpose) to reduce the churning and stock pumping. The money would fund Social Security permanently, among other useful things. IIRC the EU already does something like this.

  12. Dizz says:

    We sold my parent’s home in a ‘tight market’ in January. A 2100 sf family home: 4BR, 2.5 baths, mid-century, well maintained. It was in good shape but the kitchen and baths had last been remodeled in the 80s – think yellows & browns. Recently painted, new roof, new HVAC, finished basement. A family could live in the house for 10 years without having to put any $ into it unless they wanted to.
    We priced it competitively (~$285k) and put it on the market where it sat. Dozens of looky-loos but no offer. Our agent told us to keep lowering the price, which we did a few times to ~$240k, but still no offers. Houses were selling all around us but they all had been ‘recently updated’. (Thank-you Zillow for your free market research :). Since we’ve remodeled a few houses we decided to update it ourselves. Over a period of 3 months we put $30K into the house (bath fixtures, kitchen cabinets/ appliances, recessed lighting, refinished the HW floors – all greys & whites) and put the house back up for sale. The price was set at $325K and we had multiple offers in 24 hours. We closed for $359K pocketing the extra $90k. The family who bought it (3 small kids) had been out-bid on two previous houses and were ecstatic that we accepted their offer.
    We spoke with several realtors before doing the remodel. Why wasn’t there a family who wanted a good house at a reasonable price that they could move into then take their time updating it to their liking? (Like we had done with two houses before finally creating our dream home.) Their opinions were that families these days are too busy/ not interested in doing that. They would rather pay more and move into their dream home right away.
    In addition to the housing market being tight, there is a huge need for folks who want to/ know how to/ build and remodel homes. We have counseled our 3 grandkids to become electricians, plumbers, and/ or general contractors. So far one has taken our advice!

    • Rayne says:

      I can understand entirely why your house moved after you did some work. The family that bought it had three small kids. You don’t share the ages, but if they are K-12 they may be involved in sports and arts and my god, the amount of time juggling one kid for sports and arts is bad enough. And if they’re younger children, or have any special needs? Time is a scarce commodity.

      We built my current house when my kids were old enough to care for themselves for the most part — ages 7 and 12 — and the sports they were in didn’t interfere in the six months during the build process. I often lugged them with me to the building site where they did their homework or helped clean the site while I handled some construction matters. I honestly don’t know if we could have done this with one more younger child who needed more care or an older child involved in sports/arts, or if I had been in a more demanding work situation.

      And now a pandemic, when more people are working remotely, when employers are expecting even more fluid work hours, when parents are switch hitting childcare? No way — they simply don’t have the time for one more thing. Parents need turnkey housing.

      • Dizz says:

        The kids were young: 2, 4, & 6. Probably no sports teams yet but certainly in the future.
        The house was always going to sell to a family with young kids – big yard, good schools, quiet neighborhood. I don’t judge the buyers – they bought what they wanted and the bank said they could afford it. Good for them.
        It’s just different than how we did it. The $240k house was functional, safe, clean, etc. Same square footage, same good schools, same quiet neighborhood. Our younger-selves would have taken out a smaller loan, lived in the house for a few years to save up some cash, and then made the updates with our sweat equity. Then the 40% jump in the home’s value would be ours.
        It was mind-boggling to us that no one put in an offer on the dated version. After we absorbed (we were slow to do so/ boggled mind) how much today’s market is different than the one we knew, we made the updates. It was our parent’s home (the one we grew up in) and we wanted a nice family to move into it. We needed to show them how nice it could be. Having done so with our own homes (and HGTV!) we knew we could do so.

          • P J Evans says:

            10 or so years back, there was a guy on my train who bought a house, then promptly put a lot of money into “improvements”, including buying – and having shipped halfway across country – a mahogany dining-room set. He was working as a contractor for a public agency – legal type stuff – and paying for two babies that needed special formula for medical reasons. I couldn’t see putting money into all that, with the kids and a job that isn’t secure.

    • vicks says:

      I will add that interest rates are incredibly low,
      When borrowing money is relatively cheap, for some, it may make more sense to pay more/finance more for a home that’s been updated rather than find the cash to remodel.
      For most people, being able to scrape up a 10 or 20% deposit to put down on a home is a major financial milestone; people hanging on until they have that additional 30-50K you don’t hear about so much.
      On the other hand a seller with some equity in thier home can take advantage of those same low rates to get a loan for the remodel and make a decent and fairly quick profit for thier efforts when they go to sell.

    • timbo says:

      Interesting observations and story related. Thank you.

      I wonder at what home price point that this sort of improvement no longer gets benefits? I suppose that’s why one must get a good real estate agent with recent experiences behind them in the same market to help out. And talk to friends and relatives possibly that have moved homes recently in the same markets if at all possible.

      Here in the SF Bay Area, where old homes are often going for $1.5 million, etc (depending on neighborhood and convenience) I don’t feel that it’s all that beneficial to plow money into home improvements prior to selling, given that whomever buys is likely going to have the desire to replace whatever you do add/fix/replace with something they themselves fancy? Maybe I’m wrong, but the amount of money put into improvements to get someone to pay even more money for a place must have a point of diminishing returns… and guessing what someone with $1.5 million pre-approved loan to buy a place seems hard in advance, especially with no good reference point. Sigh. Well, I guess your story has just convinced me that there is a good reason to consult with real estate agents every now and then about which home improvement will bring long-term improvement in home value… vs the quick paint job… not that I’m in the market either way, just that, who knows, maybe someday it might happen (and currently I’m doing some home improvements because of being home even more than normal due to the pandemic.)

      (I should also maybe talk to the young couple that moved in and started having kids next door about a half-dozen years ago. I’m sure their experiences looking and then upgrading their home would lead to more insight about where “more value for money” on initial pricing might be at…)

      • timbo says:

        Apologies to many. I am indeed very lucky in my situation at the moment. It could have been better but it most certainly could have been a lot, lot worse. Re-reading Rayne’s topic here tonight has reminded me of exactly how insane it is out there for those who are without good community and family resources on which to depend.

    • timbo says:

      Ya think? If there’s poor regulation of the loan and derivative markets, it’s only a matter of time… right now the banks and the mortgage companies are trying to appear like they’re on good behaviour but… smh

    • Rugger9 says:

      I would agree, but this bust cycle will happen when one of two things happen: the credit is cut off (which is what happened in 2008 due to the derivatives market running out of cash) and/or the lack of people willing to invest in overpriced housing.

      It will not take very much, and since we are still down millions of jobs and many of the returning ones aren’t as well-paying as before the pandemic hit, I think the day of reckoning comes sooner than later. If the Biden recovery hits a bump, like for example the GOP blocking the next jobs program, the old bugaboo of “investor confidence” will cause those snowflakes to pull back and not loan money for anything.

  13. JasonS says:

    Canadian in Vancouver here . 1.4 mill average detached home price. The dream left years ago as it takes a working person 30 years to save the down payment on a house. 600 square foot condos in the 800k range . Good times.

    • earlofhuntingdon says:

      Yes. I gather Vancouver housing has been unaffordable since the Brits decided to give back Hong Kong to the PRC. The influx of Asian-sourced cash was astronomical. Now, it’s stateless capital looking for the best geographies or the most “under-valued assets,” as defined by elite MBAs.

    • Ken Muldrew says:

      It’s my understanding that the B.C. government has been taking steps to reduce the number of investors/speculators buying houses in the province. Have their measures just not met with success or have vested interests managed to thwart them so far?

      • JasonS says:

        The previous government let things get so out of hand criminals were bringing millions of dollars in 20$ bills to the casino and laundering it . There is actually a commission right now looking into it. The government has a property transfer tax that they make hundreds of millions off every year so there is little to no incentive to fix the problem. Up here is what will happen down there if nothing is done. Really the problem is monetising something that average people need , shelter. It’s disgusting and should not happen in a civil society.

  14. nord dakota says:

    I have a house in a Midwestern city in a neighborhood of mostly older homes (pre-WWII including a lot of old conversions to apartments but also conversions back to SFH) which is a target area for developers tearing down these houses to put up apartment buildings, with neighborhood associations fighting the trend but losing more often than not–we’re also near a public university. There are several blocks not far away where I lived 25 years ago, big apartment blocks with two or three homes whose sellers refused to sell dwarfed by these. The apartments are also mostly beyond the means of the sorts of renters that used to rent the conversions. My house is nothing special–it was a conversion that had gone downhill, bought in 1998 for 20% less than it had sold for as a conversion in the 80s because of poor maintenance. It’s been fixed up but is still in the “needs work” category. Not a week goes by without a mass mailing from developers wanting to buy me out. They take out entire blocks at a time. My son has been approved for 200k, there is a small selection of homes, the one he is interested in was going to be sold to a developer last year just as the pandemic arrived which scuttled the developer’s financing. Fortunately the location is fine for him but not attractive to a lot of buyers (although. . . across the street is a former industrial laundry which got turned into a home assessed at $7 million–someone else who didn’t care about location and went for super cool).

  15. earlofhuntingdon says:

    Speaking of unaffordable dreams, I’ll re-ask the perennial question: Who bailed out then aspiring Supreme Court Justice Brett Kavanaugh by paying off his $1.2 million mortgage, his $200,000 credit card balance, and his $92,000 country club debt?

    Kavanaugh’s affluent retired parents – a former top cosmetics industry lobbyist and a judge – could have afforded it, but then why did Kavanaugh not admit it? It’s a common leg-up among the wealthy elite. But if anyone other than family bailed him out, conflict-of-interest alarm bells ring.

  16. Tom says:

    Discussions such as this always remind me of the scene in the film “Zorba the Greek” where the character Basil (Alan Bates) asks Zorba (Anthony Quinn) if he’s married. Zorba replies: “Am I not a man? And is not a man stupid? I’m a man, so I’m married. Wife, children, house–everything. The full catastrophe.”

    • Rayne says:

      Yeah, except for the part I mentioned about flat to falling birthrates and young people unable to buy a house.

      It’s going to be just Zorba and his spouse/partner/significant other living out of their car in a Walmart parking lot.

      • Tom says:

        You mentioned the Canadian housing market above and I have seen the high demand for housing here in southeastern Ontario: tiny houses on small lots in the less desirable parts of town selling for $250 thousand after being on the market for only a week.

        There is a young fellow in my area keeping a sort of deathwatch over me. He drops by every few months to tell me he will offer me a good price if I’m willing to sell my home. He has explained that his aging parents leave nearby and he’d like to move closer to them. He also says my lot is big enough for him to build a workshop so he can start the home business he’s always dreamed of. He probably sees me as an elderly gent living on his own who should be ready to downsize, but I’ve had to tell him that I like living where I do and still feel the need to provide a home base for my three adult children for the times when their sometimes precarious independent living situations fall through. But I sympathize with his position and have told him he might have better luck finding a place by checking with a real estate agent.

        • Rayne says:

          Yikes. That young fellow is kind of stalker-y. I’d be tempted to check his story and then sic a bunch of real estate agents on him.

          • posaune says:

            We constantly get “offers” for our 1880 row house: Letters, specifically citing our RE tax account, names, etc., even hand-written notes making an offer. And phone calls. It is spooky.

            We must be one of the few who have planned to pay off the mortgage and deed it to our son.
            He’ll be able to live here mortgage-free or rent it for income — should he hit a rough patch in life. We just put on a new tin roof (50-yr lifespan) and solar panels.

            I recall from our years living in Poland that there were no mortgage vehicles there until around 2004. House building was planned a few room-additions at a time (pay as you go): hence, the typical “look” of a polish suburban or rural house of unmatched materials, even unmatched floor levels due to varied foundation materials and methods. Once a house reached the desirable state, it was handed down generation to generation. In Małopolskie Voivodeship, younger generations were often obliged to live in their inherited family home because it was paid off — they didn’t really move for employment, etc. Owning a house was the gold standard. Now there are mortgages in Poland — not sure what the market is doing there now.

  17. Franktoo says:

    Rayne: From my perspective, the problem with student loan debt is fundamentally caused by several economic factors: 1) Given the lack of competition on price of tuition, room and board for the last half-century, the cost of attending college has risen faster than inflation and the earnings of middle class and upper middle college graduates. 2) States are funding a smaller fraction of the costs of public universities, especially during and after the Great Recession. California charged no tuition at public colleges in 1970, and infamously now spends more on prisons than higher education. 3) The FEDERAL GOVERNMENT has ENABLED students to pay rising tuition by expanding college loans. (Before the Wall Street financial engineers went crazy, the early years of the housing bubble was partially driven by increased federally subsidized mortgages – just like the bubble in prices of college tuition.) 4) Meanwhile the increasing supply of college graduates has reduced competition among employers for college graduates (except in a few specialties like computer science). 5) The higher cost of post-graduate education and over-supply has left some students with enormous debts that distort the big picture. Given these economic factors, no one should be surprised that an increasing fraction of borrowers are having difficulties re-paying student loans. These problems won’t be solved by indiscriminately cancelling the debt of college graduates – those who are destine to become more affluent than their peers who didn’t go to college.

    More fundamentally, except for the rich with connections, no 18-year-old and few of their parents are capable of making sensible decisions about a roughly $100,000 investment in a college education, especially when one doesn’t know what degree they might obtain and what jobs they will be qualified for. While the average student comes out ahead by investing in higher education in the long run, the INCREASING PRICE means college has become a losing investment for a larger fraction of students and creates a massive liquidity crisis in the years after graduation, when the pay-off from a college education is lowest. Every student should have the opportunity to attend one year of college to discover how competitive they are and what career opportunities and salaries a degree will offer – without running up a debt.

    Since students and parents lack the knowledge to “invest” in the college market, I think the appropriate solution is for the federal government to refuse grant loans to students who plan to attend colleges that haven’t pledged to keep tuition and other costs constant until the fraction of their graduates struggling to repay loans decreases substantially. Purdue University – the only university in the country being run for the benefit of students by former governor Mitch Daniels – has kept tuition constant for a decade without increasing subsidy from the state or increasing the student to professor ratio. Other colleges presumably could do so, but they aren’t being run for the benefit of their students. States will increase funding for truly desperate public universities and demand better financial management. Elite colleges seeking to tap the increasing wealth of the top 5% and 1% through rising tuition could chose to make loans directly to students (and become invested in the financial success of their less-affluent students).

    • Rayne says:

      Thanks for your feedback, Franktoo.

      These problems won’t be solved by indiscriminately cancelling the debt of college graduates – those who are destine to become more affluent than their peers who didn’t go to college.

      While your points about the market are interesting and worth discussion, I think you’re out of touch. You have no real idea what college graduates are making right now, depending on their career path, compared to their non-college educated counterparts. Having a degree right now does not assure affluence.

      Nor do I think your comments have taken into consideration monopsonic conditions pressuring wages downward across nearly all career paths.

      More fundamentally, except for the rich with connections, no 18-year-old and few of their parents are capable of making sensible decisions about a roughly $100,000 investment in a college education, especially when one doesn’t know what degree they might obtain and what jobs they will be qualified for.

      Right…millions of kids just plunge blindly into college without having built a portfolio of achievements on top of a focused curriculum and grades as well as work experience. Clearly you have zero idea what kind of pressure students are under to get into college for the degree they have chosen — why, parents commit a little light bribery every day just because they need a hobby.

      Every student should have the opportunity to attend one year of college to discover how competitive they are and what career opportunities and salaries a degree will offer – without running up a debt.

      Yeah, so cancel $50,000 they spent doing just that. Thanks for the assist.

      I think the appropriate solution is for the federal government to refuse grant loans to students who plan to attend colleges that haven’t pledged to keep tuition and other costs constant until the fraction of their graduates struggling to repay loans decreases substantially.

      We do need a complete analysis of publicly-funded universities in this country to determine why schools are doing such a pissy job ensuring students aren’t burdened when they graduate. But I don’t think withholding federal funds is the answer.

      Funny how you never mention NCAA sports at all though college coaches are the highest paid public employees in most states. Perhaps we kill off college sports instead and focus on education — or is that a road too far for you since you didn’t even mention it?

      I’m going to go pop some popcorn before the pile on begins. This ought to be good.

      • Franktoo says:

        Rayne: Thanks for the reply. In response to my claim that 18-year-olds and most of their parents have no idea about how much it is sensible to invest in a college eduction, you said: “Right…millions of kids just plunge blindly into college without having built a portfolio of achievements on top of a focused curriculum and grades as well as work experience. Clearly you have zero idea what kind of pressure students are under to get into college for the degree they have chosen.

        Colleges have been raising costs well above inflation and the growth in salaries of the average college graduate for decades and this phenomena will continue until something forces them to stop. It is precisely the pressure you cite above (and the lack of competition on price) that allows colleges to continue to raise prices above inflation every year and to fail to invest in lower cost alternatives. And it is the increasing financing from the federal government that allows them to respond to that pressure. Don’t get me wrong – college still is a good investment for the average student forced to borrow, but an increasing fraction lose money or have financial difficulties for many years that interfere with owning homes when they have young children. This is the reason why we are discussing indiscriminately cancelling debts some our better educated and more affluent citizens owe the federal government.

        You and others don’t think capping the cost of college is the right solution, but it is A solution. Few colleges can afford to stay in business without access to students with federally insured loans, so they will be forced to cap tuition. (I’d also demand they do so without changing their student to faculty ratio.) Indiscriminately cancelling the debts of Americans with the advantage of a college education doesn’t address the cause of the problem and certainly won’t fix it. Universities are run for the benefit of their faculties, not their students/customers. It is a rare university president that can survive pressure from the faculty. The elites on boards of directors are never willing to control spending that benefits fellow elites and rising college tuition isn’t a problem for their families.

        University sports are a separate topic because those profits are retained by athletic departments and don’t reduce tuition for the average student. However, without colleges, the market value of 18-21 year-old athletes is extremely limited. If the NBA or NFL magically disappeared, new leagues for their great athletes would immediately replace the old ones. If colleges got out of the football and basketball business, new leagues would not replace them. We already have a variety of minor league teams that could hire those who don’t want to go to college and play for free-tuition. Minor league baseball is a perfect example. Free tuition is a vastly better deal than minor leagues and club teams for the vast majority of college athletes. As best I can tell, it is the loyal audiences of excited students and alumni that built the “minor leagues of amateurs” sponsored by colleges into massive money-making machines they are today. IMO the real problem is non-profit colleges paying “for-profit salaries” to those coaching these amateurs. In truth, universities are also paying “for-profit salaries” to some elite professors and administrators too.

    • PhoneInducedPinkEye says:

      People who are the first to attend college in their family don’t have the same access as those with parents who attended college, and I can guarantee you that the former will be hurt a heck of a lot more by any restrictions on government backed loans or funding. If you have parents that have been through the system they can help you dodge some pitfalls that a first generation college student might not know about.

      So support needs to be broader, not narrower, or the sharkier parents who have dealt with these types of regulations will simply juke them to the advantage of their kids.

      It’s unfortunate but a lot of people with a four year degree aren’t that much better off than their parents, if at all. A lot of jobs which don’t pay that much more above $15 an hour are asking for a four year degree now.

      Things like history and literature and other humanities related fields are important but good luck buying a house in an urban area unless you go into STEM, and even then you’ll probably get screwed.

      It ain’t easy! And those jackals charging obscene amounts of tuition to fund stadiums and coaches and hush money settlements doesn’t help.

  18. Franktoo says:

    Rayne: I’d guess that investors are snapping up the 900-1200 square foot homes with three bedrooms and two bathrooms, a basement and a two-car garage in suburban Michigan for sound economic reasons: They know that it now costs far more that $160,000 to build such homes. In some areas, zoning restrictions favored by those who already own homes – and who WANT prices to rise – make it difficult to build affordable housing. No one wants more development and traffic in their community. NIMBY! Investors realize that fewer Americans have the job security to make 30-year mortgages and home ownership a sensible financial risk for lenders, despite the lower interest rates available from federal insurance of mortgage backed securities. Investors realize renting a home increasingly will be a more practical option for many Americans. Like those who occupy their own homes, investors can avoid paying capital gains taxes when they sell appreciated homes and re-invest in like properties. Needless to say, these investors are also NOT interested in seeing new construction the supply of affordable homes increase. Your children’s generation, with little political influence, will be the losers, but the real problem isn’t investors responding to market forces. No politician will ever get elected running on a platform of reducing the cost of homes.

    The pandemic has greatly exaggerated these problems by SUDDENLY creating a large number of people wanting to live further from where they work. Supply and demand are out of balance. Nationwide the supply of homes for sale currently matches supply at the peak of the housing bubble in 2004 and the lowest in 60 years. In many areas, this is a seller’s market. Like the housing bubble, this may not a sensible time to invest in a house or decide what long-term public policy is needed. In my affluent suburban area near a big city, Zillow suggests that the price of my home has oscillated wildly during the pandemic and dropped more than 10% – presumably because fewer people are expecting to regularly commute to the big city to work. The builder of my house who lives in the neighborhood says he couldn’t build a similar house in a similar location for anything close to the price we paid a few years ago and claims things look good in the long run, but supply could exceed demand for decades if more people work from home. New Zealand just gave its central bank with the task of maintaining stable home prices, in addition to the normal task of controlling inflation (and in the US maximizing employment).

    • Rayne says:

      Investors realize that fewer Americans have the job security to make 30-year mortgages

      I don’t know what drugs you’re on but you should share them. The investors in question don’t give a flying fuck about the average single-family home mortgagor who intends occupancy. They care about parking their capital and ROI.

      I have to tell you I stopped there. I didn’t read any further. You need to check in with reality sometime.

      • Franktoo says:

        “Investors realize that fewer Americans have the job security to make 30-year mortgages”.

        Correction: Investors who are buying single-family homes to rent realize that fewer Americans have accumulated the 20% down-payment mortgage lenders are asking for today. After the housing bubble, lenders stopped making mortgages with lower down payments. Fewer Americans have the job security needed to be good bets to build up enough equity to protect the lender.

        Instead of investing in riskier home mortgages, investors are investing directly in homes for rent.

    • earlofhuntingdon says:

      To quote Rowan Atkinson’s, Toby, if you’d read your Bible, you would know that it was damnation without relief. About as much of a non sequitur as the idea that investors have the slightest concern that an individual owner/occupier be able to pay a mortgage for thirty years. What they want is nominally clean paper that looks good until they offload the product – months, at best.

      Capital bundles and shovels those mortgages so fast, it would make your head spin. They slice and dice the revenue streams in endless ways, then offload the risk via other investments and insurance products. Not much has changed, really, since the practices that led to the Great Recession. Besides, few families stay put for thirty years.

      • Franktoo says:

        EofH says: “Capital bundles and shovels those mortgages so fast, it would make your head spin.”

        However, they can only do so when there is a market for bundled home mortgages – ie bundled mortgages that will not default. Investors and regulations have learned from the housing crisis. The instruments that bundle mortgage debts may not have changed much, but the quality of the mortgages has changed.

        In the housing bubble, bundled mortgages were wrongly given high credit ratings by agencies who were paid enormous sums by those mortgage bundlers. Today, some of those problems have been addressed, but rating agencies are still being paid directly by companies that issue securities. And the government is still ensuring mortgages bundled by Fannie and Freddie.

  19. earthworm says:

    rayne:
    thank you for posting this, and i might add, i have missed your voice on this blog in recent times.
    the array of comments has provided useful input to my thinking on the topic of greed-ball money sluts.

  20. Eureka says:

    Quelle dystopia. I appreciate that you apply your expertise and creative talents to elucidating and solving problems like these, Rayne. And I hope someones are listening.

    Also I hope that popcorn is “hull-less” for greater enjoyment.

  21. PhoneInducedPinkEye says:

    Thank you for sharing the story of how frustrating and difficult the attempt to buy a house of your offsprings friend has been, I have been going through the same thing. Home prices are so inflated that to buy a house without serious structural problems or 20k of garage repairs and yard sloping, shoppers have to pay an insane eye popping amount to get a house in Minneapolis. And there is so much pressure to make a bid even if the inspection sucked, you end up doubting your judgement and getting sick with worry.

    25% down seems right out. And even if I bought a house I would be stretched to go back to school or start a family. I’m lucky enough to be paid pretty well and if it’s this rough for me it’s got to be impossible for a whole heck of a lot of people.

    Yes student loans should be forgiven we are getting screwed. Our parents paid $150 per credit that is now $1200 per credit.

    But the main thing is the insanely inflated home prices and I don’t know that anyone has any great ideas on how to get those down other than banning speculators.

    • timbo says:

      Raising mortgage/US lending rates would drive the prices down in all likelihood. The thing is, it wouldn’t help any investments backed by real estate equity. And it very likely wouldn’t make the price of entry any lower for folks who must get 30 year loans to buy a house. For home owner borrowers, it’s either low interest and high purchase price, or high interest burden and low purchase price, the amount spent ending up about the same over the course of 30 years of debt.

      The Congress could pass some law(s) that would possibly limit foreign investments in domestic real estate. Some countries have such laws. Mexico is a good example, although I’m not sure what the limitations are these days (if any?). As someone else pointed out, Canada has or is considering doing this too.

        • timbo says:

          It is typical for foreign entities that don’t want to let on that they’re investing to use trusts and other cutouts to hide their investments by various means, some legal, some not so legal (and the legality can also vary depending on the origin of the money and the country invested in, etc, etc, etc). It is likely that the data in the following chart is not tracking those more secretive investments in the US by foreign interests but gives one an idea of how much the above board, easy to track foreign investments in the US domestic market may be:

          https://www.statista.com/statistics/610369/total-property-sales-to-foreign-buyers-in-the-us/

          Again, it is typical for foreign entities that want to not let on that they’re investing to use trusts and other cutouts to hide their investments for many reasons. As I mentioned earlier, the US could pass laws to make these more hidden types of investments much harder to finagle.

  22. TooLoose LeTruck says:

    Ha! You should be in the Bay Area…

    The house right across the street sold for $230K in a short sale last time it was on the market, maybe 8, 10 years ago…

    Now?

    Good chance it’d go for $850K to $900K, maybe even more…

    This is in east Oakland, out by the former, late, great Mills College, soon to be a UC satellite campus…

    Did I mention I’ve been hearing a machine gun at night of late?

    No, not a semi-automatic pistol or rifle… a fully automatic machine gun…

    • P J Evans says:

      My parents bought a 12-year-old house in 1966, as a foreclosure. (They got the bank to loser the price by telling them we’d do the fixing-up.) They sold it in 1980 for about 20K less than the other houses in the neighborhood; it’s not a ranch house like the rest, so it stands out a bit. It’s still valued below the rest. (It had a pool, once, but that was unusable when we moved in, and we filled it with dirt.)

  23. TooLoose LeTruck says:

    “The homeless population has jumped by 63% since 2017 in Oakland, where the median house sales price is about $750,00”

    “Oakland has a homeless population of 4, 071 people, according to data collected by Oakland and Alameda County officials. OAKLAND, Calif. (KGO) — According to data collected by Oakland and Alameda County officials: Oakland has 4,071 homeless.”

    I’m sickened and furious at what I see happening around here…

  24. Daniel O'Neil says:

    It’s a supply problem. But it goes deeper than that. Think about the language of the stuff that’s getting snapped up: modest single family homes. These are suburban houses in suburban neighborhoods. Folks aren’t talking about buying an apartment inside a city, and the exurbs are stylistically not appealing. So there is a desire to live in a HOUSE, but not THAT house. Those neighborhoods are not being altered for the most part unless someone builds a bigger single family house on a lot. As you pointed out, housing stock is on average thirty years old.

    So, two things come up for me:
    1) part of what may have to give is the mental model of what a starter home for a small family looks like. When we have educated and upper middle class families proudly owning a condo or half a duplex, or even renting an apartment, then we’ll have made a shift that allows for a different kind of market pressure.
    2) We need zoning that allows that kind of house to be infilled and more dense inner city developments to make that mental change feasible. That kind of zoning is happening first, apparently. But folks still need to be okay living in a condo, a duplex/fourplex, or an apartment.

    • Rayne says:

      The supply problem is in no small part caused by foreign investment, when roughly 30% of the market is being snapped up by foreign money.

      I did mention that in my post, didn’t I. (Not really a question.)

      As for mental models of starter homes: right now, in the middle of a major transition of what work looks like, delamination from fossil fuels, AND a flood of foreign investment, we may have difficulty with constructing a new mental model. It may be more important to limit impact of forces acting on the mental models first, like constraining foreign investment and establishing a new baseline for home energy efficiency which both reduces fossil fuel consumption and encourages new job creation, before creating a new model.

  25. DTK says:

    Thanks for this post. Look to Michael Hudson for wisdom on increasing debt peonage and the grabs of the FIRE sector. The US before and after WWII provided infrastructure and basic needs at or just above cost. The short of it is the increasing financialization of the economy and the struggle of average Americans to break even. The original meaning of the free market was freedom FROM monopolists, bankers, and landlords. Thank You

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