Nests, cribs and caves
Saturday, July 14, 2012
JIM:
Home ownership, until 2008, was a big part of the American Dream. After World War II, Levittowns sprang up across the country, including right here in Eastern Pennsylvania. When my wife and I got married in 1970, I was under orders to report to the Ninth U.S. Coast Guard District headquarters in Cleveland. We rented a one-bedroom apartment for $150 a month. When, five years later, the landlord had the gall to raise our rent by $25, we bought our first house. The cost was $36,500 … about the same as a BMW 328i today … but with more living space. Our older neighbors informed us that in the 1950s, when they bought these same houses with GI loans, the cost was about $7,000. Of course, in those days, Joanne and I had a combined income she as a reading teacher, I as a Coast Guard ensign of about $15,000.
Not much changed, until four years ago. That's when the housing bubble burst, precipitating the Great Recession from which we have yet to emerge intact. Millions of Americans were complicit in blowing the bubble and keeping it airborne for as long as it floated up there. Buyers were eager to leap feet first into debt, assuming that housing prices would continue their steady rise. Lenders allowed these eager investors to obtain mortgages that they really couldn't afford to pay over the long haul. Wall Street greed merchants bundled the mortgages into derivatives, ignoring what our first-grade teachers had taught us: zero times zero is always zero.
One result of the resulting debacle was hundreds of thousands of home foreclosures. Another is historically low interest rates. A third is soft home prices. The low mortgage rates and the home prices are great, if you can qualify for a loan. Four years ago, almost anybody could. Today, even sound prospects are sometimes turned away by skittish banks.
Consequently, the U.S. is looking more like Europe, whether we like it or not. Our son lives with his family in Hamburg, Germany. They enjoy terrific, free health care, and a public transportation system that is reliable, ubiquitous, and inexpensive. When Christiana gave birth to our granddaughter Antonia, Chris received a long paid-leave from her job. This is all great.
On the down side, at least as seen from our side of the Atlantic, even finding suitable two-bedroom apartment, when the baby was born, was challenging. As in so many European nations, long-term leases are the best most couples can reasonably hope to acquire.
Our Millennials may find that they, too, will be a generation of renters.
This may not be all bad. A house is as demanding a part of the family as is a child or a dog. The laws of entropy ensure that, as soon as you've remodeled or painted one room, another is shedding its wallpaper or peeling off its paint. Roofs have a nasty habit of leaking. Driveways love to crack and reduce themselves to potholes and gravel. Furnaces gleefully crap out in January, air conditioners in a July just like the one we are having right now.
When these inevitable little disasters strike, you the homeowner are on your own. Or you go hat in hand back to your bank for a home equity loan … so much for your "castle" being your best investment.
Still, given an even chance, most Millennials, I'm betting, would opt like most Boomers to buy rather than rent. That's the Dream, even if it has been a nightmare for the past four years.
CLAIRE:
I read recently that my generation 18 to 29-year-olds is being dubbed "Generation Rent," for obvious reasons. According to the 2011 census, for the first time in a hundred years large U.S. cities are growing at a faster rate than their suburbs. In a poor economy, the city makes the most sense for a lot of younger people; it's where the jobs are, public transportation is cheap, and despite the fact that my parents consider a monthly rent "throwing money away," it's a heck of a lot less scary than committing to a mortgage while you're still paying off student loans.
So while it's not the most flattering moniker, I can understand why so many of my friends are spending upward of $700 per month to rent an apartment. After all, I don't know a single person my age who's planning on "settling down" any time soon; the whole "find a career, get married, have kids" track has been somewhat demolished by current job prospects. Young adults are switching jobs like underwear (whether because they've been laid off or gone in search of something better than minimum wage) and barely have time to think about wedding plans, let alone children. When you can't commit to a job for the next several years at least or feel like the job hasn't committed to you how can you commit to a house? Living month-to-month is simply a reality for many.
On the other hand, owning is an undeniably appealing prospect. It would be nice to avoid the fate of moving every single year (I have a really big bed, for one thing). Paying extra fees to have pets or to paint walls or to hang pictures it's all par for the course with renting, and all those little annoyances add up. Plus, there's just something about having your own place and really making it yours. I would certainly agree that homeownership is still a dream that even Generation Rent will probably aspire to, in time. Carrie Bradshaw of "Sex and the City" may have made renting look cool and carefree, but only the most dismally deluded still aspire to be a Carrie. The rest of us would like a little security in this day and age.
Home ownership, until 2008, was a big part of the American Dream. After World War II, Levittowns sprang up across the country, including right here in Eastern Pennsylvania. When my wife and I got married in 1970, I was under orders to report to the Ninth U.S. Coast Guard District headquarters in Cleveland. We rented a one-bedroom apartment for $150 a month. When, five years later, the landlord had the gall to raise our rent by $25, we bought our first house. The cost was $36,500 … about the same as a BMW 328i today … but with more living space. Our older neighbors informed us that in the 1950s, when they bought these same houses with GI loans, the cost was about $7,000. Of course, in those days, Joanne and I had a combined income she as a reading teacher, I as a Coast Guard ensign of about $15,000.
Not much changed, until four years ago. That's when the housing bubble burst, precipitating the Great Recession from which we have yet to emerge intact. Millions of Americans were complicit in blowing the bubble and keeping it airborne for as long as it floated up there. Buyers were eager to leap feet first into debt, assuming that housing prices would continue their steady rise. Lenders allowed these eager investors to obtain mortgages that they really couldn't afford to pay over the long haul. Wall Street greed merchants bundled the mortgages into derivatives, ignoring what our first-grade teachers had taught us: zero times zero is always zero.
One result of the resulting debacle was hundreds of thousands of home foreclosures. Another is historically low interest rates. A third is soft home prices. The low mortgage rates and the home prices are great, if you can qualify for a loan. Four years ago, almost anybody could. Today, even sound prospects are sometimes turned away by skittish banks.
Consequently, the U.S. is looking more like Europe, whether we like it or not. Our son lives with his family in Hamburg, Germany. They enjoy terrific, free health care, and a public transportation system that is reliable, ubiquitous, and inexpensive. When Christiana gave birth to our granddaughter Antonia, Chris received a long paid-leave from her job. This is all great.
On the down side, at least as seen from our side of the Atlantic, even finding suitable two-bedroom apartment, when the baby was born, was challenging. As in so many European nations, long-term leases are the best most couples can reasonably hope to acquire.
Our Millennials may find that they, too, will be a generation of renters.
This may not be all bad. A house is as demanding a part of the family as is a child or a dog. The laws of entropy ensure that, as soon as you've remodeled or painted one room, another is shedding its wallpaper or peeling off its paint. Roofs have a nasty habit of leaking. Driveways love to crack and reduce themselves to potholes and gravel. Furnaces gleefully crap out in January, air conditioners in a July just like the one we are having right now.
When these inevitable little disasters strike, you the homeowner are on your own. Or you go hat in hand back to your bank for a home equity loan … so much for your "castle" being your best investment.
Still, given an even chance, most Millennials, I'm betting, would opt like most Boomers to buy rather than rent. That's the Dream, even if it has been a nightmare for the past four years.
CLAIRE:
I read recently that my generation 18 to 29-year-olds is being dubbed "Generation Rent," for obvious reasons. According to the 2011 census, for the first time in a hundred years large U.S. cities are growing at a faster rate than their suburbs. In a poor economy, the city makes the most sense for a lot of younger people; it's where the jobs are, public transportation is cheap, and despite the fact that my parents consider a monthly rent "throwing money away," it's a heck of a lot less scary than committing to a mortgage while you're still paying off student loans.
So while it's not the most flattering moniker, I can understand why so many of my friends are spending upward of $700 per month to rent an apartment. After all, I don't know a single person my age who's planning on "settling down" any time soon; the whole "find a career, get married, have kids" track has been somewhat demolished by current job prospects. Young adults are switching jobs like underwear (whether because they've been laid off or gone in search of something better than minimum wage) and barely have time to think about wedding plans, let alone children. When you can't commit to a job for the next several years at least or feel like the job hasn't committed to you how can you commit to a house? Living month-to-month is simply a reality for many.
On the other hand, owning is an undeniably appealing prospect. It would be nice to avoid the fate of moving every single year (I have a really big bed, for one thing). Paying extra fees to have pets or to paint walls or to hang pictures it's all par for the course with renting, and all those little annoyances add up. Plus, there's just something about having your own place and really making it yours. I would certainly agree that homeownership is still a dream that even Generation Rent will probably aspire to, in time. Carrie Bradshaw of "Sex and the City" may have made renting look cool and carefree, but only the most dismally deluded still aspire to be a Carrie. The rest of us would like a little security in this day and age.
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