The American Dream, Twice Removed

Tyler Durden's picture

I can’t avoid linking that to earlier periods of American poverty (see the photos below), says The Automatic Earth's Raul Ilargi Meijer, times in which ‘leaders’ thought it appropriate to let large swaths of the population live in misery, so everyone else would think twice about raising their voices. A tried and true strategy.

But of course there are large differences as well today between the likes of Greece and Connecticut. In Athens, there’s a poverty problem. In Fairfield County, there’s a (fake) ‘wealth problem’. Ever fewer people can afford to buy a home, so the rental market is ‘booming’ so much many can’t even afford to rent.

 

We can summarize this as ‘The Ravages Of The Fed’, and its interest rate policies. Or as ‘The Afterburn of QE’. That way it’s more obvious that this doesn’t happen only in the US. Every country and city in the world in which central banks and governments have deliberately blown real estate bubbles, face the same issue. Toronto, Sydney, Hong Kong, Stockholm, you know the list by now.

 

Helen’s real-life observations offer a ‘wonderful’ picture of how the process unfolds. The demise of America comes in small steps. But it’s unstoppable. The same is true for every other housing bubble. When no-one can afford to buy a home anymore but a bunch of Russians and Chinese, rental prices surge. And then shortly after that the whole thing goes up in smoke.

Here’s Helen Loughrey (via The Automatic Earth):

I am getting a reminder about class systems and downward social drift while searching for a rental in Fairfield County, Connecticut.

First of all, I realize I am extremely lucky to be able to afford a home at all. More and more Americans increasingly cannot. I am very aware that my current socioeconomic status could be gone in an instant. And so I am more inclined to notice class issues. There, but for the grace of GDP, go I.

And as one who studies the economy, I know we are all destined to go ‘there’ in the not-so-distant future. Owners are downsizing to become tenants, occupancy rates may rise to depression era levels, and homelessness will continue to rise up through the social fabric like water wicking up a paper towel.  

This week, I rejected an unoccupied split level rental for the dilapidated condition of the heavily scuff-marked and dingy old wall paint and dirty carpets and peeling deck paint. The house screamed “I do not care about my tenants’ quality of life.” I told my real estate agent that it indicated the landlord would not be responsive to tenant needs. He replied, “Well, after all, it’s a *rental*.”

And that statement in its conventional wisdom summed up class assumptions: buyers deserve better than renters. Yet landlords expect renters to deposit $8,000 to $10,000 of their savings, to maintain excellent credit ratings, to pay more than they would for a monthly mortgage, and to increase payments over time by $100/month every year without commensurate capital improvements to maintain the quality of the premises.

I replied, “Well, renters are people too.” I was facing the fact that despite having been a conscientious homeowner and model tenant, I had lost significant socioeconomic status by becoming a renter.

Another anecdote: Our current rental is likewise being shown to potential tenants. This week an until-recently wealthy, brand new divorcée with a pre-teen visited while I was here. She needs to switch her daughter from private school to the public schools and to quickly obtain a separate town residence in order to register her daughter. 

I spiffed up the place for my landlord, put fresh flowers on every table, and told the prospect how marvelous it was to raise our daughter in this school district with the backyard pool available to her new friends, how the third bedroom was a cozy office/family room. She listened politely but she visibly recoiled at the drop in living standards that comes with renting after a divorce. Welcome to the Greenwich renters club, my dear.


Arthur Rothstein Low-cost housing. Saint Louis, Mo. 1936

I remember despairing in our 2013 rental search that we would not find a decent home by the time we had to register our daughter in the Greenwich school system. We had compromised on this residence. Granted, the New York regional prices are stratospheric compared to our southern Maryland experience. You must DOUBLE your housing costs and even then you get much less square footage for the money.

Second, even though Greenwich is notoriously about rich and famous estates in “back country”, nevertheless like any city there are a lot more resident middle class people in average homes and even less well-off poor living in lower quality public housing apartment complexes.

The options in our price range were deplorable when we arrived here. So we paid a lot more than we thought we could afford only to share a portion of a 1950’s era non-updated house with the resident owner living in the in-law apartment.

I tried not to compare it to the larger modern house we had owned in Maryland but on my depressed days, I let my mind wander through our old home for old times’ sake. (But even there during the real estate boom years, I remember thinking we could not afford to buy again in our own neighborhood.)

In 2013 we had offered less than the listed price for our current Greenwich rental but past the top of our affordability. We rationalized that there was a swimming pool bonus for our daughter to invite new friends over. Our offer was accepted. We incorrectly assumed that over the years, the monthly rent would not rise much.

The list price should have been a clue to us that the landlord would attempt to increase the price back to their higher monthly income expectations. Plus the landlord retired from his job and took out a home equity loan a year later. 


G. G. Bain Eviction in an East Side neighborhood of New York 1908

Four years later, the time has come for us to balk at any further increases. This 3 bedroom 2 bath “tear-down” house apartment now is listed at $5500 and in three years the landlord likely expects rent creep to provide the $6000 they want in monthly income. Well, good luck to the next tenant. So we are house-hunting again. We no longer require the public school system,  but since we are paying cash now for college, our options are still limited. (I could write another essay about skyrocketing college costs.)

We recently concluded that we are now priced-out of the Greenwich rental market for what we are seeking: my husband needs a home office. I want to get moving finally on a productive food garden and starting a Permaculture Design school home business.

Convincing a potential landlord to allow me to convert costly wasteful lawn space into productive perennial food garden space; and to accept all my pets, a well behaved 6 pound lapdog plus 24,000 to 140,000 honeybees …. does not endear me to the real estate agents here. (I could write another essay on entitled and controlling listing agents.)

Other factors also place upward pressure on rental pricing: The sales market is in a longterm slump. Fewer potential buyers qualify to enter the market because they have recently lost their life savings in the housing slump themselves or they are too young to have acquired any.

Bank lenders expect larger down payments than in the recent past, amounts which I expect will be forfeited to the banks anyway when the economy tanks and more “homeowners” are thrown out of work. (Tanked economy, thanks in part to those same banks betting their depositors money in declining real estate.)

Renters risk losing their deposits to unscrupulous thieving landlords but nothing beats a thieving bankster. That down payment you saved? Kiss it goodbye, you are very likely never getting it back. And banksters know this. It is why they demand high down payments.

They’re counting on the eventuality that a good portion of current mortgagees will have to forfeit in a depressed economy. But you would not know there is a sales market slump, let alone another looming crash, by reading glowing real estate -sponsored newspaper articles. It is no wonder many  sales are for cash not lien, to wealthy foreign buyers.


Carl Mydans Kitchen of Ozarks cabin purchased for Lake of the Ozarks project, Missouri 1936

Anyone buying housing today should expect an asset value loss to occur when the real estate market adjusts downward again. (Which is another reason we are not buying in this market.) However sellers, listening to advice from hopeful real estate agents and pollyannish economists, are holding out for *higher* prices to return.

They eventually remove their properties from the sales market in order to rent them after they still cannot find a buyer even though dropping the price continuously for two years. And because fewer people can afford buying than renting, the price of rentals is rising now while the price of real estate is dropping.

Landlords who are strapped with high mortgages from the boom years, and other landlords who may have owned their older houses outright but then took out home equity loans to finance eventual roofing or HVAC expenses, and even to afford replacement cars or family vacations, are placing expectations on their tenants to provide the income to pay for those bank loans.

Meanwhile town zoning laws still prevent the tenant cost savings of subletting; and prevent owners from contracting with simultaneous multiple tenants. Yet the pool from which to draw tenants who can afford a whole house or 3/4 of one is still shrinking.

Renters like us may eventually opt (and perhaps should be opting now) for smaller square footage multiple family apartment complexes. (But no food gardening amenities? Rental managers take note.) Whole houses, with high mortgages to cover, will remain vacant and become foreclosed.

And I get it, owning a mortgaged property is also costly. But while renters are seeing standards of living drop now, so too will landlords when their properties sit vacant due to aggregate inability of renters’ incomes to afford to support the mortgaged landlords in the manner to which they had once become accustomed.

There will be a resurgence in foreclosures. And then, if they are lucky to still have a job income, we’ll also welcome them to the renters club.

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Dilluminati's picture

That B&W photo reminds me of the good old days when lead paint was included in the rent.  

On a serious note, spent all sunday doing maintenance on a utility room, completely cleaned, water conditioner cleaned tank removed and cleaned out, new insulation etc..before and after pics amazing, but I don't expect to see that in the sale prcie.  The $100 materials with the month 5% cashback at home improvement stores made the timing right as I turn my attentions to the garden.  

Homes are dead money but better than the alternative of renting which is negative money.  The reason you pump 1000 or so a year into maintenance is that it facilitates a quick sale when you go to market.  Also by keeping up on the maintenance if you hit a rough spot you don't find yourself in a bad situation.  But it is still a buyers market and going to stay that way, that is why you need to do the maintenance.

Would I do a second home?  Nope sold that one last year.  But owning a home and not owning a mortgage is it's own peace of mind and yeah.. cash money later.

Whoa Dammit's picture

I got a postcard in the mail from the IRS. It said that 2 out of 3 people qualify for free tax prep services by making less than $64,000 per year. Since  66% of filers earn less than $64K, then 66% of housing stock nationwide should sell for no more than $192K if mortgages were properly underwritten.

Houses Depreciate's picture

Rent is "negative money"?

Convincing yourself that paying a 300% premium for a rapidly depreciating asset when you can rent it for half the monthly cost is called dumb.borrowed.money.

conraddobler's picture

Compared to other parts of the world we're still very rich.

What's dying is the American dream that was always an illusion.  Hard work still pays but it's always an uphill battle, same as it ever was.

Sudden Debt's picture

Bullshit. What has changed is that everybody wants to pretend he's rich and show off.

Living within your means is a very vage concept these days.

It's the facebook cult where you can only pretend to be happy when you're spending.

And their frustration is tht there's always a more expensive version of the crap they buy and next year... they own a last years version... that doesn't have the 2017 decals...

 

Pairadimes's picture

What has changed is that government regulation has destroyed the ability to innovate without huge capital or start a new business, while Obamacare regs turned employment into a part-time proposition. While this was going on, the Fed was aiding and abetting the financialization of everything except used condoms.

If you are not an influence-peddling politician, a bankster, a corporate bigwig or a professional in one of the government-subsidized industries like healthcare or education, then you are proper fucked. 

conraddobler's picture

Nah.

Not true.

Yeah there's tons of regulations but technology beats that back rather easily.

I ran a business for 17 years so I know what I'm talking about. Fear kills more businesses than anything, most people will hold onto old ways of doing things or try new unproven things in a panic and blow themselves up.

It really is not hard to spend less than you take in if you are prudent and think things through you will be fine.

The number one killer of business is faulty illusions built in our media culture that say if you aren't killing it you're not making it.  The truth is slow and steady with a constant eye on improvement always wins the race.

Nothing has changed on that front.

If you were to do a post mortem on most buisnesses that were ever successful and then failed later on you would see they always had a fork in the road they could of taken and survived and even thrived.  It's usually boiled down to risking too much on an unproven strategy or on simply never changing when it was obvious years before change must come.

That and taking too much out of the business to live off of when more could of been retained by it.

People who run businesses have to think of it as a seed crop.  You don't eat the seed crop until you have so many freaking seeds you can't find places to put them all then fine but I'd suggest selling out right at that point.

Refuse-Resist's picture

"government-subsidized industries like healthcare or education, then you are proper fucked. "

 

Yep. But let's call them what they really are: Government protected monopolies.

 

That's where the money is nowadays. Everyone else toils to support those fucking parasites.

Those days are coming to an end one way or another.

conraddobler's picture

The American dream started off as the pursuit of personal Liberty.

It turned into a nightmare when it went off that course.  

I have nothing against people wanting to build a life for themselves who work hard but if we all lose the Liberty then what the fuck good is any of it anyhow?

 

DelusionsCrowded's picture

One of the side effects of womans liberation OR State facilitated divorce , is that men who used to prefer driving a old car and have money in the bank , can no longer afford to not keep the wife happy by public shows of success , thus debt comes before equity . Now ofcourse it socialized behaviour for common people .

Refuse-Resist's picture

Hypergamy is real.

We live under a feminine imperative. A gynocracy that hates straight white men.

This straight white man has been undersmployed for several years now, and from the looks of things, will continue to be so.

 

Boca's picture

paying $5500 in rent a month, sorry, that is just stupid, take a paycut and move

1980XLS's picture

I live in Fairfield County (sadly) for 30 years now.

But these people are imbeciles. Commute another 40 mins away and save $3K per month easy.

Raging Debate's picture

Boca - I agree the family should move, probably 8ut of state. If husband is working from home anyways then it sounds like her real issue is a decent school system. This is important but allowing a woman to force this issue and take on and co tinue huge risks of serious and lasting disruption is folly. 

Houses Depreciate's picture

All the schools are dead. "Great schools" is just another realtor marketing ploy to get the target to pay far more than the property is worth.

donefuhkingaround's picture

different era - same old shit - people never learn - no matter how much $$$ we throw at education - $$ down a rat hole - can't cure stupid

-I'm donefuhkingaround

Sudden Debt's picture

6K in rent... how stupid is that.

For less you can buy a descent house.

When you can afford that, you're well off. Your taste is just to big for your wallet.

Learn to live by your means and if you can't afford to live in a "upperclass" house, don't.

 

About a month ago, my plumber was complaining that he had a hard time making ends meet...

he drives a beemer and a mercedes and lives in a 6 bedroom house.

I mean... a plumber...

People forget how life was 2 decades ago.

 

HRH Feant's picture
HRH Feant (not verified) Apr 2, 2017 7:11 PM

I have no sympathy for this bitch from Greenwich, CT. None. Fuck off and die you old whore. No one cares that you went from being high class owner to a low-class renter. Oh well. Life sucks and then you die.

Dilluminati's picture

So if Helen Loughrey started choking while smoking a meat stick and died you would laugh?

HRH Feant's picture
HRH Feant (not verified) Dilluminati Apr 2, 2017 7:32 PM

Give me a break. If you can afford $5500 a month for rent you are not poor. Delusional, yes. As I said in another post my Mainer family moved 3000-plus miles for work. They worked hard and were able to move back to Maine and retire. They didn't bitch or whine or piss and moan one bit.

I grew up poor. I have no problem being poor. But I can understand if you are used to living in a big house and having help that being poor is difficult. I don't give a damn about this bitch or the others like her.

And the Heimlich maneauver is cheap. I have no problem saving someone from choking to death. But saving an idiot that thinks $5500 a month rent is hard? That person doesn't get my sympathy. None.

frmnthng comesnthng's picture

I afford renting through sub-renting to my friends. It's how I stay off the streets.

DrZipp's picture

Husband 'needs' a home office, they have a big dog and bees, plus they want to tear up the yard to grow stuff.

Good luck with that.

No_More's picture

You can do that (have to look harder for it as time passes) but not in a place that isn't rural enough to not have HOAs. Also it's becoming increasingly common 'out here' in rural VA that raw land has been put into HOAs in unrealistic anticipation of 'exurb' growth (back pre 2007 especially) that's never going to happen.

FreeShitter's picture

The american dream is alive and reserved to .01% for owning damn near everything. 

Riquin's picture

We drove from Palm Beach to Miami to have my wife have a dental work, we used to live in Miami and Miami is growing like crazy I started counting the construction cranes and stopped at 26 and there were a lot more all over. When we got to the Mount Sinai Hospital you could feel the positive electricity all over, the hospital personnel and patience speaking English and Spanish every body happy, joking and very helpful to all the patients.

This is an example of multiculturalism and shows the positive immigration of the Cubans, every thing clean, beautiful multicolor buildings, etc.

 MIAMI TODAY:

http://www.telegraph.co.uk/luxury/property-and-architecture/elevating-de...

http://www.city-data.com/picfilesc/picc49486.php  

http://miamidade.gov/.../04.../dl3/d3/L2dBISEvZ0FBIS9nQSEh/

This is in contrast with other cities where they bring non-compatible immigrants and you get crime, terrorism and you can see that people are not happy at all.  

CNN and the rest of the stupid press do not report this at all for them the Cuban immigration is non-existent, the corrupted press hates Cubans and the prosperity that the Cuban immigration created in Miami. The Miami of the 1960s was a dump and Yes the Cubans voted for TRUMP!!! And YES Miami is great!!! And

….  Yes we believe in GOD!!!

CNN SUCKS!

 

chosen's picture

Okay, Cuba is free now, so you fucking Cubans living in the United States can go home now.  Get the fuck out of the US and rebuild Cuba, the country you ran away from like scared rats.

Arthur's picture

Chosen,

look in the mirror and see a loser.  Don't bitch go get a real job or are you so unqualified that some sad sack immigrant will out hustle you every morning for the job you are to lazy to keep?

 

 

American Snipper's picture

There is still plenty of cheap housing all across the USA, its the liberal enclaves of both coasts & parts of the rust belt that have this problem. One solution is to move away to where you can pick up homes for under $100k, and have all the room you want. Just don't bring your fucking liberal attitudes and voting patterns that created your fucking problem. 

ronaldwilsonreagan's picture

Pipe down snowflake you don't even know what a liberal is. Here is a clue , it isn't Obama or Hillary. they are just politically correct version of Drumpf.

Lost in translation's picture

Two years ago, I drove a Lexus, which I sometimes miss. Lived in a 1400 sq ft 4-bedroom, a well-built place from the 1960's. Worked full-time.

Today, I drive a used Scion, runs great and insurance is cheap. Live in a 1-bedroom apartment with cheap rent in an ok neighborhood. Work part-time, make less.

No cable TV, no social media, no garage full of things that truth be told, we don't really need, anyway.

I don't miss the old life, I'm much happier this way. More time to enjoy loved ones, nature, read a book, or just sleep.

Better.

San Pedro's picture

The drug dealers and cartels are doing well. Lots of bling and fat stacks.

Enceladus's picture

I smell a liberal. M.D. to CT. Beekeeping in a rental lof'ingl

caribbeanbarry's picture

Who else would be pompous enough to expect to keep 100,000 Honey Bees and do something called permaculture in a rented property. $66k a year for rent? Pay the kids college in cash? Pay extra for a pool so the kid can meet friends? It's really hard to empathize with the dire straits she finds herself in.

ronaldwilsonreagan's picture

Gee I wonder if inflation in rent, health care, Food are related to the fed Printering several trillion in digital money? Nah.

Bad_Sushi's picture

Just went on Zillow and saw 3 bedroom, 2,000 sq ft house for 1,400 a month. More than just one...

There was also a beautiful 4 bedroom, 2,500 sq ft house that wanted 1,695 to rent.

Great zip code, great schools.

 

Is this the end of the world the article speaks of?

 

chosen's picture

Where do you live, Alabama, Louisiana, or Mississippi?

Bad_Sushi's picture

Second largest financial center in the United States. 

gregga777's picture

The banking gangsters may escape with their lives after the next crash and the rise in social disorder by fleeing to the racist paradise of Apartheid Israel. But, hopefully, many will receive the street justice that they so richly deserve here. And, hopefully, Palestinians will kill the ones who escape to Apartheid Israel.

chosen's picture

That NYC rich guy who jumped or got pushed out a window is a good start.

HRH Feant's picture
HRH Feant (not verified) gregga777 Apr 2, 2017 8:13 PM

Yes sir. Watching an old movie from 1999, "Ride with the Devil."

I recommend people watch watch it. No movie that used the word nigger would be allowed, now. Even though in the movie the southerners had a free nigger on their side. He wasn't a slave. He was free.

We are on the verge of a civil war folks. Buckle up. It is going to be bloody and messy.

Me? I hate fucking liberals and Muslims. Pure 2nd Amendment here. Don't wanna work? You don't eat. Pretty simple concept.

The Real Tony's picture

Where I live there are no homes under a million dollars yet rents are in the 1,500 to 3,000 range a month for apartments and townhouses. Home prices seem to double every 3 to 4 years nonstop on end thanks to the Chinese.

HedgeJunkie's picture

I bought a 1,675 ft2 home, on 1/4 acre, for $75k.  In 2006, at the height of the mortgage scam, I was getting loan offers over $350k.  In 2008, the market 'decimated' me when my home value dropped to $97k.  At the time I owed around $40k.  Just checked Zillow, home value is still only $197k. 

We plan to be here in retirement, however as Commiefornia circles the drain, No. Arizona is looking enticing.  If value gets up above $500k I may consider selling and getting the fuck out of here.

I admit I did cash out to drop interest from 7.5% to 3%, going from a thirty to fifteen, and money was used for renovation and maintenance...plus a shitload of shiney, some arms, ammo, and a big fucking safe.

chosen's picture

Foreigners must be banned from buying US homes, retroactive fifty years.  Confiscated homes can be auctioned off and sold to native born Americans.  This is the same kind of invasion as the illegals, only this one is depriving Americans of a place to live.  The fucking illegals deprive us of jobs, use up massive amounts of government resources, lower wages, and raise rents.   The fucking Chinks and other foreign criminals launder their money by buying homes in the US, which jacks home prices way up and then raises rents even higher.   Come on Trump, deport these fucking foreigners if you really care about the American people.

FreeShitter's picture

Agreed but if Trump really cared about the people, he wouldnt be president.

the French bitch's picture

Jeezum, Chosen you've just wiped out half the population of NYC!

chosen's picture

"Jeezum, Chosen you've just wiped out half the population of NYC!"  

Wouldn't that be great!  The joo landlords would be jumping out of every building.

Miss Informed's picture

How exactly did you get to be "chosen"? Are you one of those "chosens"?