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This Oversupply Crushes The Value Of Existing Apartments And Will Drive Down Rents For Decades

A report from CNBC. “Last year, about 43,000 single-family homes were built for rent, the largest number in nearly 40 years according to National Association of Home Builders analysis of U.S. Census data. The built-for-rent share of housing starts is also rising, nearly double its recent historical average. ‘Our business is booming right now with build-to-rent feasibility work,’ said John Burns, CEO of John Burns Real Estate Consulting. ‘We are discussing new projects with clients almost daily. The market has become so hot that we are already having conversations about when we will conclude the market is overbuilt.'”

The Hartford Courant in Connecticut. “A New York lender, who helped finance the troubled rental conversion of the top floors of downtown Hartford’s Red Lion Hotel, has taken control of the building and the project, after the original developer defaulted on its loan. DW Partners of New York has told the Capital Region Development Authority it intends to complete the long-stalled conversion of guest rooms on top nine floors into 96 apartments. CRDA has approved state taxpayer-backed loans of up to $7 million for the project.”

“At the same time, however, another entity managed by DW Partners, DW Commercial Finance, has filed a notice with the city that it intends to foreclose on the property. It wasn’t clear Tuesday how such a foreclosure would unfold. Inner Circle’s troubles apparently are not limited to just the Red Lion project in Hartford. An offering notice advertising a Sept. 12 foreclosure sale lists eight Inner Circle hotels, including the Red Lion in Cromwell.”

The Post and Courier in South Carolina. “Despite a dire shortage of affordable housing in Charleston, several three-bedroom apartments owned by the city Housing Authority are sitting vacant, and some of them have been that way for months. In just one small apartment building, on the corner of Columbus and Nassau streets, there are three empty three-bedroom apartments that rent for $927 monthly. On the Charleston peninsula, that’s a bargain, considering that new luxury apartments for college students, just four blocks away, rent for $999 per bedroom.”

“Two of the vacant apartments at 93 Columbus St. have been unoccupied for more than six months. The building at 93 Columbus St. was among two dozen small apartment houses the authority agreed to buy at the end of 2009, taking advantage of Great Recession distressed-sale prices. The authority bought 24 buildings containing 35 apartments at a cost of $1,213,560.”

The Business Record in Iowa. “Eight of 12 Des Moines-area cities issued fewer residential building permits in the first six months of 2019 compared with the same period a year ago, a Business Record review of building permit data shows. Overall, the number of residential building permits issued during the January-June period between 2018 and 2019 dropped 22%, the review shows.”

“Des Moines, for example, issued four building permits in the first half of 2018 for apartment buildings with a total of 247 units, city data shows. The total value of the permits was $34.1 million. So far in 2019, two permits have been issued for multifamily projects that are valued at $13.8 million. West Des Moines has also seen a drop in apartment construction. ‘There may be a little softening of that market, but I wouldn’t say it’s overbuilt,’ said Dan Knoup, executive director of the Home Builders Association of Greater Des Moines.”

From Crain’s New York. “It’s been only 38 days since Gov. Andrew Cuomo signed sweeping pro-tenant changes in the city’s rent-regulation laws, and the fallout has already begun. Construction workers are losing their jobs, lenders are nervous and landlords are figuring out how to lower the property taxes they pay.”

“Meanwhile, banks are trying to calculate whether or on what terms they should be lending to the city’s multi-family buildings. A major conference call of lenders several weeks ago revealed lots of handwringing, sources say. One obvious sign is a Bloomberg story last week that said the sale of rent-regulated buildings in the city had come to a crashing half in the wake of the new laws.”

“But over the long term, values won’t increase as much as they would have and some buildings will see their net operating income fall. The Real Estate Board of New York calculated that in five years, assessments will have to be adjusted downward enough to cost the city $1 billion in annual property taxes. The new rent laws have been portrayed as a great victory for tenants over landlords. Now it’s important to track the collateral damage.”

From The East Oregonian. “As an apartment owner in Pendleton I’m not worried about the rent control bill 608 that came out of Salem. The law is predictable, out in the open and applied the same to everyone around the state without exception.”

“A much bigger uncertainty for investors and developers in Pendleton has been created right here at home, by city hall. City officials are meddling with the free market, giving taxpayer dollars away in the form of free land, reducing permit fees, cash to downtown units, road infrastructure to Pendleton Heights, interest-free loans and property tax breaks. These have not been given out evenly and equitably, but selectively by picking winners and losers.”

“The city has spurred the next 20 years worth of apartments that will be coming in the next two to three years. This oversupply of new units crushes the value of existing apartments and will ultimately drive down rents for decades as the new units are absorbed. City council is flooding the city with market rate apartments, despite the recommendations of the August 2016 Sabino housing study.”

“City officials have chosen to incentivize building only on taxpayer-owned land or downtown. This strategy punishes anybody who owns multifamily land already or purchases land to build on by putting them at a competitive disadvantage. If you currently own multifamily zoned vacant land, it will be essentially worthless until 2040.”

This Post Has 81 Comments
  1. Apartments in Pendleton, OR? You have to be kidding me. Pendleton is a wide spot in the road.

    1. I know. This sort of stuff is hilarious. All of the tumbleweed towns all over the west are sporting nosebleed land prices and they’re building apartments as if land is scarce. Get on a plane and you can’t even spot a place like Pendleton as it disappears like a needle in a haystack.

  2. 4 Trends Shaping Apartment Finance

    ‘Low interest rates are just one of the factors that are heating up the multifamily mortgage market, explains multifamily loan originator David A. Krebs.’

    ‘Not only are lower interest rates spurring more activity, but higher available loan amounts are also making multifamily financing more accessible.’

    ‘Specifically, in February 2019, Fannie Mae announced two significant changes to its Multifamily Small Loans Program, which is already well regarded for its competitive interest rates. First, the maximum loan amount doubled from $3 million to $6 million. Second, four new eligible markets were added to the program—Denver, Miami, Minneapolis, and Salt Lake City.’

    ‘These changes will open the door of opportunity for many multifamily investors looking to enter this market, particularly in the area of affordable housing for working families. This dovetails nicely with the growing demand this year for Class B and C properties. According to Marcus & Millichap, Class A properties (luxury rentals) will see higher vacancy rates this year, while Class B and Class C properties (more affordable rentals serving the traditional workforce) will see lower vacancy rates.’

    https://www.multihousingnews.com/post/4-trends-shaping-apartment-finance/

  3. DW Partners of New York has told the Capital Region Development Authority it intends to complete the long-stalled conversion of guest rooms on top nine floors into 96 apartments. CRDA has approved state taxpayer-backed loans of up to $7 million for the project.”

    Crony capitalism at its most blatant. Did anyone bother to ask state taxpayers how they felt about being put on the hook for this white elephant?

  4. I’ve harped on it before with regard to Seattle’s apartment frenzy.

    It seems from what I can see that just like SFH construction targeting max profits, everyone building apartments is targeting the top end of the {renter} supply, with millennial targeted ‘luxury’ units, and that’s supply is being pushed (more) out of alignment with the makeup of the entire body of renters for the area.

    The predictable result being increased vacancy as you go up in rental price, and/or move away from areas full of the target demographics (single, young, non-car owning, etc) as renters either can’t afford the rent, and/or aren’t willing to stick a 4-person family in an 800 sq ft ‘2 bedroom’ unit (largest floorplan in the building).

    What happens when the new buildings/complexes fail to hit their occupancy targets? Look out below…

    1. In other news, MGSpiffy shouldn’t be allowed to post under the influence of medication… (leg still hurting round the clock, but the swelling is better at least)

      1. Glad your swelling is going down. I think a better rule is that some people should not be allowed to post without medication. Although the person I am thinking about seems absent today.

  5. ‘There may be a little softening of that market, but I wouldn’t say it’s overbuilt,’ said Dan Knoup, executive director of the Home Builders Association of Greater Des Moines.”

    There’s an Upton Sinclair quote that applies here, Dan.

  6. ‘the fallout has already begun. Construction workers are losing their jobs, lenders are nervous and landlords are figuring out how to lower the property taxes they pay’

    ‘Meanwhile, banks are trying to calculate whether or on what terms they should be lending to the city’s multi-family buildings. A major conference call of lenders several weeks ago revealed lots of handwringing, sources say. One obvious sign is a Bloomberg story last week that said the sale of rent-regulated buildings in the city had come to a crashing half in the wake of the new laws’

    I’ve heard stamping your little feet is more effective than hand-wringing.

    1. How much better it would be for all concerned if these statist idiots just let market forces do their job.

  7. Think about that.

    Folks that can’t afford a house are given a mortgage and the taxpayers guarantee it.

    The Expiration of This Key Mortgage Rule Could Upend the Housing Market

    Nearly the entire mortgage market now operates either under Dodd-Frank’s qualified mortgage standards, or under the expiring provision, known as the “Government Sponsored Enterprise Patch,” or GSE Patch. The GSE Patch extends liability protection to certain mortgages that would otherwise not meet qualified mortgage standards, with the goal of ensuring credit access to more borrowers. The CFPB says it intends to let the GSE Patch expire as scheduled, no later than January 10th of 2021.

    https://fortune.com/2019/07/26/mortgages-gse-patch-housing/amp/

    1. For some reason I expect something like that (and more) to be deliberately done once the fed realizes that we are slipping towards another crash. All sorts of crazy things may be pulled out, and damn the unintended consequences or who they wipe out.

      1. Wow. Insanity.

        “It allows Fannie and Freddie to hold mortgages for people whose debt-to-income ratio exceeds what is necessary to obtain “qualified mortgage” status, which calls for a debt-to-income limit of 43 percent.”

        1. Yeah, this was the door opener for the non-banks. Years ago. Oh but lending is soooo tight! Horse-hockey.

      2. Thank goodness. Hopefully we can stay the course. This may cause some short-term pain but will be worth it in the end.

        1. “Hopefully we can stay the course.”

          Thanks for that. I always enjoy starting my day with an early-morning joke.

          1. BTW, rumor has it that there is an election next year and, if true, then all stops are likely to be pulled out to keep this economy (choke) humming and the elected elected.

      3. “The so-called “GSE Patch” was created in the wake of the financial crisis, as a temporary way to allow American borrowers with higher levels of debt to access credit.”
        Yes, because we want people borrowed to the hilt to borrow even more money. Amazing, that for eight years we averaged only 1.9% GDP growth when we encouraging such behavior. Everything that could be done to inflate the bubble was done. It should be no surprise that we have another bubble.

          1. Lending standards are “strict” compared to fog-a-mirror 2005, when they were handing out I/O and neg-am, and no-down at the same time.

          2. ‘compared to fog-a-mirror 2005’

            That’s a matter of opinion and not very relevant. The only thing that matters is can the borrower pay the loan back, and is there any skin in the game to keep payments coming if underwater. With no-doc, zero down loans I have documented recently, the outcome is not very promising for payback if prices fall. Which is what’s happening.

  8. Was out driving in east county San Diego and saw a sign by the side of the road “buy your home with 0% down!” with a phone number to call. Maybe I should call and ask how much of the home I would actually own with 0% down. The real estate ads on Craigslist are littered with “0% down” captions. The ranks of the 0% down army are growing.

    1. While the people who buy with no money down actually own nothing, they still can drive up the prices, I was looking at the prices of real estate in Burlington Vermont, and literally the prices are almost twenty times what they were in the 1970s, it is not the wages, they have risen any thing close to that, five times at the most, but the state did move from Republican to Democrat. As I said earlier, I used to believe that liberals just did not understand how their regulations including zoning drove up prices, now I believe the opposite, they know exactly what they are doing. This driving up asset prices to increase spending and taxes paid, It is planned. It is a debt driven model but it is their model. Yes, it is bubble model but if they can get full control before the collapse, it is fine. Neither Cuba nor Venezuela turned their backs on socialism after their economies collapsed. Once socialist governments get enough power including disarming the people, the socialist leaders never give up power.

  9. “Folks that can’t afford a house are given a mortgage and the taxpayers guarantee it.”

    If Trump is not reelected it will back in around ten days.

  10. The Presidential election is really coming down to a choice between people who will continue to try to inflate a housing bubble to promote growth and a President who is trying to promote growth through returning manufacturing to the US. Once again a globalist vs. a nationalist view. He is a study which you will not read in the globalist press:
    https://www.breitbart.com/politics/2019/07/25/study-permanent-tariff-on-all-chinese-imports-would-create-1m-u-s-jobs/

  11. Financial Crisis Yields a Generation of Renters
    WSJ
    Christina Rexrode
    July 27, 2019

    “For generations, the wealth of U.S. households was built on the foundation of homeownership. That is changing.”

    “Homeownership rates for younger Americans have fallen sharply over the last decade. The median age of a home buyer is 46, the oldest since the National Association of Realtors began keeping records in 1981. Economists, policy makers and mortgage lenders expect the trend to extend to younger generations. The decline illustrates what for many Americans is the real legacy of the financial crisis.”

    “Homeownership rates for young people are near their lowest levels in more than three decades of record-keeping. About 40% of young adults, ages 25 to 34, were homeowners in 2018, according to federal data analyzed by Freddie Mac. That is down from about 48% in 2001, when Gen X-ers were young adults.”

    1. Pretty good summation of the issue from the article:

      “The crux of the problem: Home prices have outpaced wage gains. From roughly the end of 2000 to the end of 2017, median home prices rose 21% after adjusting for inflation, while median household income rose 2%, according to federal and industry data analyzed by Freddie Mac.”

      1. Another good observation:

        “Some young adults said their inability to buy a home had made them rethink having children, which could exacerbate the challenges created by America’s aging population.”

        This article basically encapsulates many of the trends I have seen and articulating for a while now:

        1) We face a demographic storm whereby a lot of housing wealth in boomer’s hands won’t be absorbed by the broke millennial generation. This wave is just starting but still probably 9 years to peak.
        2) High debt loads (student loans) and poor earning potential means fewer children and less consumption. Tons of data over the past 4 years on this.
        3) Changing preferences and disillusion with equating the American Dream to home ownership is changing preferences with some younger buyers (e.g. the rise of the voluntary renter who could afford to buy overpriced housing, but chooses not to).

        In short, housing will correct. I had hoped that it would already be happening sooner, but with the suppression of interest rates we might still be a couple years out.

        1. All good observations, and things that have been brought up here at various times.

          Indeed we do have a larger than ever cohort of younger people who can not afford to buy a house, with the consequences you mentioned.

          In addition to the point you list, as more young people stay as renters, income and wealth inequality will continue to increase, creating who knows what additional volatile consequences.

          You point about the failure of boomer generation being unable to “unlock the wealth” in their homes is probably the one being most ignored. As it’s not hit the peak of people needing to downsize yet, buyers are probably being found from other segments. When it does reach it’s tipping point, I suspect the disruption to the system will be big and fast – enough to scare the powers that be who may be out of ammo at that point.

          At lot of the older sellers may be in no position to slash prices without taking a loss, and thus can’t do it. And I think the change in housing tastes will only accelerate between now and then. 3000+ sq ft, energy inefficient homes with every imaginable purpose of room, and located far away from job and city cores… there may be no buyers at any price.

          1. We already see starting to happen in this area, with the average price per square foot in more densely populated affluent “urban” areas far outpacing that of the suburbs and exurbs.

            I say “starting to”, because larger (3,000+ sq ft) homes are still being built at this point, but only in areas that better support exorbitant prices that builders apparently demand.

            An example:

            https://www.zillow.com/homedetails/540-Argyle-St-Birmingham-MI-48009/24504565_zpid/

            https://www.zillow.com/homedetails/11101-N-Ridge-Rd-Plymouth-MI-48170/88308085_zpid/

          2. I think you all forget the parents will pass on the house to their kids, instead of selling and moving to Florida or North Carolina. So they will own property but its going to be very hard for them to buy it on their own.

          3. My guess is in 10 years or so, those 3000 sq ft houses will be bought up by rental companies. They in turn will rent the house out to multigenerational families of illegal immigrants and their legal kids. You could fit 6-7 incomes in a house like that. Not to mention 6-7 vehicles in the garage/driveway and a couple white vans in the street.

          4. there may be no buyers at any price.

            This is what I fear has happened to. My own father has a $3M-$4M home. It was a parade home (e.g. Parade of Utah) from a few years ago. This means it was one of the featured homes built in a year where gawkers would come and “ooh” and “ahh”. The home was about to be lost in 2011 and he bought it and cut a deal to pay for the furnishings. He bought the land below and made tons of customizations to the house. There is an amazing pool and water slide.

            He has wanted to sell the home for several years now because it is just too big. The problem, as I see it, is that it is so specialized that I can’t see it appealing to anyone who is going to be willing to pay what he thinks it is worth. The market for such a house is limited and I think he is going to list it because upkeep and time on the house is crazy. But I just don’t know who would buy the house because I see the competition up in that range and I think many people who can afford it would probably just do a custom build. The one thing that he does have going for him is that it is on the side of a mountain overlooking the entire valley. Still, I don’t think it sells unless he is willing to dramatically cut the price, which I don’t think will happen because he wants it to be worth what he is into the house.

          5. You could fit 6-7 incomes in a house like that. Not to mention 6-7 vehicles in the garage/driveway and a couple white vans in the street.

            Oddly, I think this would be the best case scenario as it would result in getting optimal use of the space. This would be far better than just letting empty space sit unused most of the time.

          6. This is spot on. Every time I hear the line from the REIC shills “hOmEoWnErS hAvE mOrE eQuItY tHaN eVeR”, all that says to me is when they make the life decision to downsize, they’re more able and willing to take a price cut to get the property sold, meaning, there’s room for the market to slide lower rather easily.

            That magic Yellen buck equity is only on paper until you actually sell it. More people will realize when they all head to the exits, there aren’t enough knife catchers to make that equity real.

          7. Other startups in the Bungalow space include WeLive, PadSplit, Common, etc.

            HomeShare recently shut down operations, so I wonder how sustainable this business venture ends up being. It might not scale to every city. It would seem that there might be a service in each major city that could perform this slicing and dicing of large SFH into separate rooms.

          8. @aNYCdj

            That will happen in some cases (and I’ve met some very middle class home owners here on MI who inherited their homes) but consider if there are multiple siblings, or the house is not paid off, or has a reverse mortgage or HELOC on it.

            The house I bought last year was sold because the husband had died after years of a degenerative disease, and I learned they had cashed out about $300k to pay the hospital/medial bills in the final years. How many boomers will “tap their equity” voluntarily or not, to pay for end of life care, nursing homes, etc, or even some final years of bucket list spending?

            If there are multiple siblings to inherit, usually they are all going to want the money, or if one child really wants it, they’ll have to buy the others (assuming they can agree on a price AND afford the buyout).

            @Chino – thanks for the listings, and yeah.. those are way more house than almost anyone needs. I grew up off of 23 mile road, and out house sizes were: 800 sq ft when I was a baby, 1585 sq ft during our school years and 2710 sq ft for the “We arrived house” on Lake St Clair with the 28′ Sea Ray tied up in back after I went to college and they got their PHDs. This house I bought last year I consider to be a little bigger than optimal and has all the space/rooms we will need or use, and is under 3000. I feel that rhe return (ROI) on quality of life diminishes more rapidly as you go further and further beyond what’s really needed.

            @OneAgainstMany – “he wants it to be worth what he is into the house.”

            That I fear will be a trap many people will fall into. I used to collect a lot of vintage 8 and 16-bit computers and the like back in the 90s (Exidy Sorcerer, Altair 8800, etc) – some have heal their value but an equal number haven’t. When I downsized and sold off a lot of them to help pay for my divorce, I had to get over it (what it cost me) quick and accept what I could get. If some people get hung up on “getting what it’s worth” then they are liable to eventually get even more hurt as demographics and other trends don’t swing things back in their favor.

            I really do see a limit as to how popular Home Sharing can be. I’m not sure where it is, but at some point people will just move in apartments to get 100% autonomy over “their space” and not have to deal with intrusions from people they didn’t pick to live with.

          9. If there are multiple siblings to inherit, usually they are all going to want the money, or if one child really wants it, they’ll have to buy the others (assuming they can agree on a price AND afford the buyout).

            And this is where it will fall apart during a time of inflated expectations of price. Where there are multiple siblings at least one is going to think it’s worth a lot more than it can actually get sold for at an arm’s length. And the sibling who wants it is highly unlikely to be willing to pay the other sibling’s wishing price.

    2. There is another unspoken reason for this decline. There has always been a higher homeownership rate for whites even among people of similar incomes. The new generation is more “diverse” than the previous generation so if they just buy houses under the similar pattern there will be less homeowners and more renters in the future. The attempt to change this fact failed miserably just before the last housing bust when minority ownership rates first closed the gap and then with the large amount of foreclosures widen above historic rates.

      1. This is the best argument which can be made against either using reparations or no down payment loans to close the wealth gap. As conservatives have often stressed it does come down to personal responsibility and not all cultures produce similar results. Look in a free country people can spend money anyway they like and I want that to continue. People should spend their money to maximize their happiness but they should have to accept the results. If you want to spend your money on inexpensive sedans so you can afford that 3000 sq. foot house, that should be your choice. If others would like to buy the BMW and buy smaller homes or not at all that is also a choice. However, everyone needs to accept the consequences of their own actions. This is a very interesting opinion supported by very interesting data: https://quillette.com/2018/07/19/black-american-culture-and-the-racial-wealth-gap/

        1. The essay uses the Parable of the Pedestrian to argue against reparations for historical injustices such as slavery, redlining and income suppression but does so poorly:

          “A reckless driver runs a stop light and hits a pedestrian, injuring her spine. Doctors inform the pedestrian that if she ever wants to walk again she’ll have to spend many painstaking years in physical therapy. Clearly, she bears no responsibility for her injury; she was victimized by the reckless driver. Yet the driver cannot make her whole. He might pay for her medical bills, for instance, but he cannot make her attend her tedious physical therapy sessions; only she can do that. Still, she might resist. She might write historical accounts detailing precisely how and why the driver injured her. When her physical therapists demand more of her, she might accuse them of blaming the victim. She might wallow in the unfairness of it all. But this will change nothing. The nature of her injury precludes the possibility of anyone besides her healing it.”

          In this analogy, the victim still received compensation to go to therapy. In this parable, the victim did have medical bills paid for, but the hard work of rehabilitating was still up the individual. In other words, the victim received compensation for wrongs received. So to use this as the crux of the argument to support withholding any support for historical grievances is quite inconsistent.

          One might address the scope, form, or structure of such help. But to argue solely self-help because black culture is noxious and obsessed with cars, jewelry, and clothes is not very helpful and does seem to be very productive and quite smug.

          To redress racial disparities, one might conceivably apply behavioral economic principles and “nudge” behavior/culture in ways that build wealth.

          1. I agree that the injury analogy isn’t very convincing.
            What I do think is convincing is the idea that culture, spending choices and work ethic plays a huge roll in choices made and upward improvement financially.
            It’s kinda like people are comfortable with whatever the values of their race is. If a certain group doesn’t want to adapt values that tend to produce wealth or success, than that’s more of a choice.

            I’m not really going to tell any race what values they should have. I’m also not going to want to be responsible for choices made.

            If certain minority groups don’t value what some other group might value it’s just choice.
            I don’t value a lot of white culture value because some of it is nuts and it doesn’t produce a better life.

            Now everything is your a racist, your a racist , and this is suppose to explain the choices people make.

            The fact that people have a natural bias toward adopting the values of the ethnic group they were born into Is something that will never change. That doesn’t mean your a racist.

            I’m most likely going to take heat for this post.

          2. The richest black billionaire in America has a good story:

            “On paper, Robert Smith’s journey was a textbook American success story: A fourth-generation Coloradan, he was the son of two Ph.D.’s who became Denver school principals and put education first at home. “Their father and I stressed the need for both of our sons to persevere once they identified and pursued a goal,” say Smith’s mother, Sylvia. “Robert understood that preparation, hard work and dedication were key to success in his classes.” In 1981 Smith headed to Cornell University to study chemical engineering, spending many nights and weekends in a three-person study group that met in the basement of the engineering school’s Olin Hall. During summers, Smith worked at Bell Labs back home in Denver–a college internship he landed as a high school student after persistent cold-calling.”

            https://www.forbes.com/sites/nathanvardi/2018/03/06/richer-than-oprah-how-the-nations-wealthiest-african-american-conquered-tech-and-wall-street/#416650e43584

            He also just picked up the tab of $40 million in student debt, so I’d say he’s paying it forward:

            https://www.usatoday.com/story/news/nation/2019/05/19/billionaire-pledges-pay-off-morehouse-grads-student-loan-debt/3733949002/

            “The fact that people have a natural bias toward adopting the values of the ethnic group they were born into Is something that will never change. That doesn’t mean your a racist. I’m most likely going to take heat for this post.”

            I don’t think this is racist at all. It’s a good observation. All cultures have behaviors and norms that are positive, neutral, and negative. Culture is is fluid: it changes us and we change it. I think what becomes problematic is stereotyping and overgeneralizing. I’ll never forget my first year of college when I had a black roommate that had a skateboard. I uttered something along the lines of, “I never knew black kids liked to skateboard.” It was a stupid, ignorant thing to say and I cringe thinking about it in hindsight. My school had a good amount of diversity of other cultures and races, but not many black kids. And those who were black were often star athletes. Just my exposure.

  12. “3000+ sq ft, energy inefficient homes with every imaginable purpose of room, and located far away from job and city cores… there may be no buyers at any price.”

    About 3 years ago I traded a 2-story 2,000sf house for a 1-story 1,700 sf house. I can’t imagine a 3,000sf house as 1700 is still too big. 1200sf to 1400sf looks like the sweet spot for me.

    Retirement is just over the horizon… looking for an Oil City destination. If I don’t find one, then I’ll stay put.

    1. “I can’t imagine a 3,000sf house as 1700 is still too big.”

      I know an old woman in a 5,000-sqft (or more) Los Gatos house on a huge lot, widowed two husbands and collects retirement, SSI and dividend benefits from both. She never worked but has more assets and income than most working people I know today. The battery in her car lost its charge likely from lack of use…time for a new car! She leaves the garden hose running all night, or leaves one of the doors open and takes a nap while the AC is running, careless economic comfort. It’s funny listening to her comments while watching the news, e.g., blacks, gays, teachers, etc., reminds me of a John Birch throwback.

      1. The US is a meritocracy though. I’m sure some how this all makes sense and she earned everything she has.

        1. People often say marrying for money can be a very difficult way to obtain it. Whether it is true or not she made from a financial point of view in her marriages smart choices so it is a form of meritocracy. Not one I approve of but still an example of a successful choice. She was probably very hot in her younger days and she monetized it.

        2. The big house is a prop 13 bonanza. She was college educated and raised three successful children. I think her first husband was a triple-dipper starting with an air force commission, next a postal investigator, and lastly a junior college professor. The second husband was an retired IBM executive and then a stock broker. Their success was accumulated during the post WWII era.

    1. Which begs the question: why do people want to live in urban areas? The more California resembles a third world country, the more inclined I am to move away from any of its high-density areas.

      1. Lots of reasons with almost everything right outside your building you dont need a car…….which means no chance of drunk driving, The closer you live to your job the easier it is to get Overtime since they will always call the nearest employee in a pinch. The variety of choices, when we lived in Manhattan right next to Rodney Dangerfields each month we get val pak coupons, and 2 for 1 dinners and we sampled so many types of food from all over the world, and walked there and back.

        If you run out of milk or toilet paper at midnight on a sunday you can walk a block or two and buy some.

        The downside is unless you can afford luxury, average apartments are small, and you have to learn how to store stack arrange to live like you are not in a hoarders house. Which is so much easier then even 10 years ago since everything is digital

        1. I understand the conveniences; I lived in NYC. At some point, filth and disease outweigh conveniences.

          1. Maybe we were lucky but east side was never a problem because people were always out and about till late so it made it hard for anyone homeless to live here.

          2. I think you are right to emphasize the convenience of proximity. People underestimate just how much of their lives is spent going from box to box (e.g. school, work, mall, superstore, sports venue) in traffic. Even in our little town the traffic has become almost unbearable because there is no walkability.

      2. Here, the trendy word is “walkable”, I’m guessing because younger and/or more affluent home buyers apparently tend to favor more urban living.

        The homes that command the highest prices in this area these days are in denser communities that have an older, traditional downtown that can be walked to. You see it as a selling point in virtually every listing, some variant of “walking distance to downtown [city name]”.

        This, in a metropolitan area that was built by a century of the manufacturing of horseless carriages.

        1. younger and/or more affluent home buyers

          Priorities change when you have kids. NYC was fine when I was a single professional. Now that I have an autistic child who may be living at home indefinitely, my property in Encinitas, which was within walking distance to 3 of the 4 portable bathrooms the city erected during San Diego’s Hep A outbreak, looks less and less attractive as a future home despite its “desirable” location.

  13. I think it’s cruel to give a person a loan that they have a high chance of defaulting on, or the value going down. They must of learned from the 2008 crash that you can’t have this faulty leading without a disaster in the making, yet they repeat the errors. Social Justice isn’t making bad loans, it’s Insanity. Faulty lending is also a major variable in creating a false market.

    In all the studies of the 1929 stock market crash, they know the faulty lending
    of buying stocks on margin was the main culprit in the false run up of the mania stock prices. The 2008 real estate crash again was caused by faulty lending that created a false market rise in prices.

    The short way of saying it is you can’t give a person a loan that’s based on the hope that the value of the investment will go up and cure the sin of the unqualified buyer.

    Lending use to be , what is the qualifying of this applicant that they will pay back this loan long term, what are the risk factors, and does the underlying investment (home) have the value to be sold should a default happen , but not based on future value, but current value when the loan was made.

    That being said, lenders for decades could count on the current value appraisal to be stable . This idea that in a faulty lending mania market that the current value is accurate is a joke.

    The short way of saying it is that if a asset has the potential to fall say 50 %, than the best loan to value you can loan is 40% of current false price.

    The amount of credit given in credit cards is really shocking also.

    The thing is that It appears that the approach to any kind of lending is that if anything goes wrong the government will back it up or bail it out. This is so nerve wracking to watch.

    1. “I think it’s cruel to give a person a loan that they have a high chance of defaulting on, or the value going down.”

      There used to be a “fiduciary responsibility” for any representative collecting a commission.

      1. There used to be a “fiduciary responsibility” for any representative collecting a commission.

        I believe the way it works today is that the representative has “fiduciary responsibility(sic)” to make sure they collect a commission for themselves, and not be concerned with anyone else.

  14. Your so right rms.

    It almost like childish, gambling criminals took over the system and all that matters is fees . Than they want to pass what they created to someone else.

    1. The trend today is commerce without being responsible. For instance the Pharma industry doesn’t have to pay for any vaccine damage. The harmed party has to go through some kind of claim process with the government, who than pays. Must be nice that a industry can transfer their liability to the taxpayers.

      Just watching my whole life I conclude that everything that government touches turns it into a unjust mess. By the power to tax and make laws, big Government picks the winners and losers and the lobbyist set the agenda .

  15. The Post and Courier in South Carolina “Two of the vacant apartments at 93 Columbus St. have been unoccupied for more than six months.”

    Look at the photos…….a total falling down rat hole next door and graffiti covered mailboxes. Bet they stay unoccupied another six months/

        1. Retired. I’d be traveling with my hang gliders and skydiving gear if I didn’t have two kids in college.

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