Stuck In Your Parents’ Basement? Don’t Blame The Economy

Started by garbon, May 28, 2016, 09:06:17 AM

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Berkut

Quote from: Jacob on June 02, 2016, 11:12:10 AM
Quote from: Tamas on June 02, 2016, 09:29:41 AM
Basically, Berkut is saying America>SF+NY

And the counter point is that the problems found in SF+NY should not just be dismissed with a "ah well, if you're not rich enough that's your own problem."

Good point, you should totally bring that up to whoever said such a thing.
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The Minsky Moment

Quote from: Berkut on June 02, 2016, 09:47:11 AM
But even if we do push it to 50 million, that proves my point more than yours - that is going to the top 15% if the US. What about the other 85%? Why should we consider the top 15% representative, rather than the median 15%?

We should consider them all - but my point is that even 10% of the population is more than enough to consider it a problem worthy of national attention and impact.  If unemployment is 10% that is considered a problem of national significance, even though 90% are employed.
The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.
--Joan Robinson

Berkut

Quote from: The Minsky Moment on June 02, 2016, 11:46:10 AM
Quote from: Berkut on June 02, 2016, 09:47:11 AM
But even if we do push it to 50 million, that proves my point more than yours - that is going to the top 15% if the US. What about the other 85%? Why should we consider the top 15% representative, rather than the median 15%?

We should consider them all - but my point is that even 10% of the population is more than enough to consider it a problem worthy of national attention and impact.  If unemployment is 10% that is considered a problem of national significance, even though 90% are employed.

I don't think those metrics are comparable.

The issue is not that the rest of the country is fine, and the 15% most expensive parts of the country are having issues.

The issue is that most everyone is having issues, and focusing on just the most wealthy areas misses the point. The uber expensive parts of the country have a problem that exists completely outside of the core issue being discussed.

So, if we want to talk about the problem of housing affordability, it is actually distracting to focus on those parts of the country where the problem is NOT primarily driven by the reasons it is a problem for the average or median, but rather is simply driven by basic laws of supply and demand. It lets people who want to deny the problem to simply refute the issue as being one about how people want to live in the most expensive places, rather than one about stagnant incomes in the middle class.

In many ways, it is a much simpler issue, although also one that is likely much harder (if not impossible) to solve. I certainly haven't heard any viable suggestions, and this problem has existed for as long as I can remember. NYC has rent controls and such, hell my sister lives in a rent controlled apartment that her landlord would love to get her out of - so I guess that is a "solution" of sorts? I don't know if the general feeling in NYC is that that is working or not overall.

It is, fundamentally, a *different* problem. One that could certainly be exacerbated by the problem in question, but if you could fix the stagnant income and rising real estate prices problem that the 85% are facing, it likely would not have a significant impact on the problems with affordable housing that NYC has been struggling with for decades.
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Jacob


frunk

Quote from: Berkut on June 02, 2016, 10:48:49 AM
Well, certainly it is the case that growing middle class income stagnation combined with rising real estate prices are going to exacerbate the already existing basic issue that expensive places are hard for non-wealthy people to live in, but that seems so obviously true as to not really be worth discussion.

However, it has been impossible for the poor to live in Manhattan without government assistance for a long time, even when by all accounts middle class incomes were growing very nicely.

So again, insisting that the discussion begins and ends where DG and garbon live (or want to live?) is not really that useful. When talking about generalities, it makes sense to talk about the averages and medians, not the worst cases.

Except it's the exact same problem everywhere.  The point is that expensive areas aren't some magical separate case that you can ignore in the rest of the country.  It's showing exactly how dangerous it is when the money available far outstrips the resources of the average person.  It's a leading indicator of just how bad it can get.

The Minsky Moment

Quote from: Berkut on June 02, 2016, 11:53:06 AM
. The uber expensive parts of the country have a problem that exists completely outside of the core issue being discussed.

So, if we want to talk about the problem of housing affordability, it is actually distracting to focus on those parts of the country where the problem is NOT primarily driven by the reasons it is a problem for the average or median, but rather is simply driven by basic laws of supply and demand. It lets people who want to deny the problem to simply refute the issue as being one about how people want to live in the most expensive places, rather than one about stagnant incomes in the middle class.

The issues are connected.  Middle income stagnation is a driver of urban housing unaffordability

In theory you could have a situation where median incomes are stagnant because the economy in general is stagnant. That would an Italy scenario, or at a greater extreme, Venezuela.  That's not what has been happening in the US over the past few decades.  Instead we have had a growing economy where most of the gains are going to a relatively small cohort at the top of the income distribution.  That cohort has unusually high demand for positional goods like apartments in desirable urban areas and that drives the prices up.  Moreover the demand is very difficult to satiate because building more supply and drawing more of those kinds of people in just increases the attractive force.  It also creates a secondary problem - new supply is concentrated at the high end of the market (luxury condos) but all these rich condo owners need people to drive them around, cook for them, dry clean their clothes etc.   Because more affordable housing supply is not increasing anywhere near the same pace there is nowhere for those people to live nearby and so they are driven out deeper into outlying areas, thus driving up pricing there.  A vicious cycle.  And that's why a neighborhood like Carrol Gardens in Brooklyn, formerly an Italian working class neighborhood as recently as the 90s, now sports 3 story row houses starting at 3 mil.  These
housing issues you see as separate are really another symptom of the same problem.
The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.
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Capetan Mihali

#126
Quote from: Jacob on June 01, 2016, 12:13:08 PM
Quote from: garbon on June 01, 2016, 11:32:48 AM
Quote from: The Minsky Moment on June 01, 2016, 11:22:49 AM
In a sense I agree that NYC's housing cost problem or SF Bay's housing costs problems are the problems of those areas, not the nation as a whole.  But then you add in DC, Boston, LA/SD/Socal, and now you are starting to talk about a very significant % of the population of the US.

Yeah just did a quick sum of those cities (+area for Bay Area) and that's 21 million people or so. That's a pretty large chunk of citizens in the US.

Googling, I get 7M for SF, 6M for DC, 20M for NYC, 4.5M for Boston, and 18.5 for LA (all metro areas). That's a total of 56 million.

Add metro Seattle for sure.

EDIT:  And metros Philadelphia, Chicago, Miami-Dade, and Denver are pretty borderline on affordable housing, I think.
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garbon

And now they've made a companion article.

http://fivethirtyeight.com/features/the-rent-is-less-damn-high/

QuoteThe Rent Is Less Damn High

Last week, I pointed to skyrocketing rents as one reason that so many Americans are living with their parents into their 20s and 30s. But relief may be on the way for millennials and their beleaguered parents: Rents may, at last, be cooling off, especially in the most expensive cities.

Don't break out the champagne — or the moving boxes — just yet. So far the biggest slowdown in rents is confined to the most expensive apartments in the most expensive cities. But there's reason to think the trend will eventually reach the broader market.

On Wednesday, Equity Residential, a big apartment landlord with buildings in more than a dozen U.S. cities, warned investors that revenues would be lower than expected because of softening rents in New York and San Francisco. It was the second time this year that the company had to cut its forecasts — and it isn't alone. Appraisal firm Miller Samuel Inc. reports that to lure tenants, a growing share of Manhattan landlords are being forced to cut prices or to offer concessions such as a free month's rent. Median rents in Manhattan (for all unit sizes) fell in March for the first time in two years before rebounding somewhat in April.



Rents are still rising faster than inflation in most of the country, and they are accelerating in cheaper markets such as Las Vegas, Dallas and Jacksonville, Florida. But the slowdown in many of the most expensive markets has been striking. A year ago in New York, rents were rising at an annual rate of 9 percent, according to an index compiled by the real estate site Zillow; in April, they were up 3.8 percent. In Los Angeles, rental growth slowed from 9.2 percent last year to 5.7 percent this year. Even in San Francisco, home to the country's highest rents (and fiercest rental battles), the growth rate has slowed to 7.4 percent from more than 17 percent a year ago.

What's behind the slowdown? Supply and demand. Developers have been on an apartment-building spree in recent years, and those buildings are now coming online, flooding the market with new units. In its press release Wednesday, Equity blamed "new rental apartment supply" for its lowered expectations. Miller Samuel estimates that apartment inventory is up 23 percent in Manhattan and 16 percent in Brooklyn in the past year. Meanwhile, demand may be hitting its limits: Miller Samuel President Jonathan Miller said some New Yorkers are buying in the suburbs rather than continuing to struggle to pay rent in the city.

"Consumers, after a number of years of rising rents, are going through some sort of affordability threshold where they start considering alternatives," Miller said.

Affordability is unlikely to improve quickly. Most of the buildings coming online are at the top end of the market. As a result, rents for luxury buildings are leveling off or even falling, while rents continue to rise in the lower and middle tiers of the market. Eventually, the high-end slowdown should filter through to the rest of the market, as wealthier renters move into expensive new buildings, reducing competition for older apartments. (In time, the new units will also become less desirable and therefore more affordable.) But market forces work slowly. Miller said he expects "more of a slow bleed than some sort of overnight correction."

The process could move faster if developers were building more apartments targeted at lower- and middle-income renters. But as Daniel Hertz has written, U.S. cities are building mostly single-family homes and high-rise apartments — leaving a "missing middle" of small apartment buildings that were once a key source of affordable housing. That's at least partly the result of zoning codes that discourage such building.

Still, even without major policy changes, the runaway rents of the past few years look like they have come to an end. Zillow expects 3.3 percent growth in rents nationwide over the next year — modest compared with the 5-plus percent seen much of last year — and many expensive cities, including New York, should see milder increases. That won't by itself reverse the affordability crisis that now plagues many U.S. cities, but at least it might give renters some much-needed relief.

Mandatory minimums

The surprisingly successful battle for a $15 minimum wage has been waged, to a large degree, at the city level. Seattle, Los Angeles and other cities around the country have adopted minimum wages higher than their states require. But now states are pushing back against such moves.

The Wall Street Journal reported this week that states including Alabama, Arizona and North Carolina have passed laws barring local jurisdictions from adopting higher minimum wages. Other states — mostly conservative states with more liberal cities — are considering doing the same. Minimum wages aren't the only target; state legislatures are also trying to prevent cities from requiring companies to offer paid sick leave and other benefits.

Backers of these so-call pre-emption laws argue that businesses shouldn't have to navigate different rules every time they expand into a new city or town. That argument makes sense when it comes to safety rules, environmental regulations or occupational licensing requirements — construction isn't any more dangerous in Phoenix than in Tempe, after all. But the minimum wage is a different story; the cost of living can vary widely from one city to another, even within a state, so it makes sense for the minimum wage to vary, too.

Stay in (the right) school

For all the recent debate over whether college is "worth it," higher education remains the best path to the middle class for most Americans. But new reports this week highlighted two important caveats: College is only worth it for those who finish their degrees and who choose the right program in the first place.

I've written before about the importance of ensuring that students who start college go on to graduate — students who drop out often struggle to pay back student loans, leaving them worse off financially than if they'd never gone. A new report from Third Way, a Washington think tank, found that many private colleges are failing to help students — and especially low-income students — finish their degrees. According to the report, at the average private, non-profit school (a small minority of all institutions), only 55 percent of full-time students graduate within six years. As Quoctrung Bui of The New York Times illustrated, the schools that enroll the most low-income students also tend to have the lowest graduation rates.

Meanwhile, separate research released this week found that students who attended for-profit colleges ended up worse off on average than if they had never enrolled at all. Using data from the Internal Revenue Service, the researchers found that students who went to for-profit schools are less likely to have a job and earn less money than they did before they started. They also, of course, have significantly more debt. By contrast, associate degree programs at public colleges substantially boosted students earnings.

Number of the week

Consumer spending rose at a 1 percent annual rate in April, the Bureau of Economic Analysis reported Tuesday. That's the fastest growth in more than six years.

Economists cautioned against reading too much into the report, which likely reflected one-time seasonal fluctuations. (For example: Unusually warm weather earlier this spring led to lower utility spending in March, which made April's more normal spending look stronger by comparison.) But even if April's jump was a fluke, the underlying trend in consumer spending remains strong. That's good news given that the manufacturing sector is struggling amid weak global growth.

We'll get a more up-to-date glimpse of how both the consumer and manufacturing economies are doing in the May jobs report, which will be released this morning. We'll have our usual coverage later today.

Also median rents in the biggest 25 cities. Interesting order.

QuoteSan Francisco   $4,535
San Jose   3,347
Los Angeles   2,631
Boston      2,499
Seattle      2,429
San Diego   2,410
New York   2,335
Denver      1,961
Austin      1,789
Chicago      1,682
Houston      1,444
Fort Worth   1,345
Baltimore   1,343
Dallas      1,335
Charlotte   1,274
San Antonio   1,244
Phoenix      1,227
Las Vegas   1,221
Philadelphia   1,204
Jacksonville   1,157
Columbus   1,126
Indianapolis   1,066
El Paso      1,026
Memphis      849
Detroit      754
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Valmy

Damn you cannot even flee to San Jose anymore. Poor Northern California residents.

QuoteSan Diego   2,410
New York   2,335
Denver      1,961
Austin      1,789
Chicago      1,682
Houston      1,444
Fort Worth   1,345

Baltimore   1,343
Dallas      1,335
Charlotte   1,274
San Antonio   1,244

Fuckers. Moving to Texas in record numbers and ruining our housing market. Not even our infamous endless suburban sprawl can cope.
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Berkut

Quote from: garbon on June 03, 2016, 07:41:27 AM

Also median rents in the biggest 25 cities. Interesting order.

QuoteSan Francisco   $4,535
San Jose   3,347
Los Angeles   2,631
Boston      2,499
Seattle      2,429
San Diego   2,410
New York   2,335
Denver      1,961
Austin      1,789
Chicago      1,682
Houston      1,444
Fort Worth   1,345
Baltimore   1,343
Dallas      1,335
Charlotte   1,274
San Antonio   1,244
Phoenix      1,227
Las Vegas   1,221
Philadelphia   1,204
Jacksonville   1,157
Columbus   1,126
Indianapolis   1,066
El Paso      1,026
Memphis      849
Detroit      754


And to my point....the median price of the rent in the 25 largest cities is around 1/3rd the price of the high end. They are not comparable, and you cannot lump them all together as if they are basically the same, and this is ONLY looking at the 25 largest cities. If you go to the 25-50 large metro areas, I am sure that price fall will be a little more, although probably not much. I think the average rent in medium sized cities is probably near 25-50% mark of this list (meaning the 25-50% place, not amount, ie pretty close to this median, but a little lower).

I am surprised that NY is not higher though - I would have thought the prices there would be more SF-like. I guess NY is huge though, and the difference between Manhattan and the Bronx or Harlem is probably pretty extreme.

Also surprised Chicago is not higher. I thought that was pretty expensive - but again, it is huge so there are probably parts that are not very desirable compared to the expensive parts?
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Valmy

Chicago is not that huge geographically. It is half the size of New York in terms of square mileage.

Oh and Harlem is part of Manhattan and pretty expensive IIRC.
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Berkut

Quote from: Valmy on June 03, 2016, 08:50:57 AM
Chicago is not that huge geographically. It is half the size of New York in terms of square mileage.

I meant huge population wise - and hence presumably has a wide divergence in housing costs.

A quick google search, for example, has average rent in Manhattan at 4081/month, which is almost double the NYC average. I suspect something similar is true in Chicago, where the "want to live" parts are very expensive, and the "you really, really don't want to live" parts are probably down at the bottom of that list.


And yes, Harlem is technically part of Manhattan, but not really. Rents there are about 60% of Manhattan averages.
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garbon

Quote from: Berkut on June 03, 2016, 08:46:47 AM
And to my point....the median price of the rent in the 25 largest cities is around 1/3rd the price of the high end. They are not comparable, and you cannot lump them all together as if they are basically the same, and this is ONLY looking at the 25 largest cities. If you go to the 25-50 large metro areas, I am sure that price fall will be a little more, although probably not much. I think the average rent in medium sized cities is probably near 25-50% mark of this list (meaning the 25-50% place, not amount, ie pretty close to this median, but a little lower).

So? You shouldn't actually expect them to be similar given that all things regarding pricing are very different across these cities. Much in the same that it is very different across areas all around the US. I don't see why average rent across the US is all that interesting given that really says nothing unless you have the context of salaries and prices of expenses in various places.
"I've never been quite sure what the point of a eunuch is, if truth be told. It seems to me they're only men with the useful bits cut off."
I drank because I wanted to drown my sorrows, but now the damned things have learned to swim.

Valmy

Quote from: Berkut on June 03, 2016, 08:55:44 AM
And yes, Harlem is technically part of Manhattan, but not really. Rents there are about 60% of Manhattan averages.

Well yeah you over a hundred of blocks away from Wall Street. But come on Berkut it is one of the most famous parts of Manhattan. The point is that even to live in Brooklyn or the Bronx you can pay a lot for very shit accommodations. Sucks for your family of five.  But, to be fair, being crammed into a shitty little apartment with your extended family is what the whole NYC experience has always been about.

QuoteI meant huge population wise - and hence presumably has a wide divergence in housing costs.

Realestate costs are based on location though. Chicago is a very compact city, at least in terms of it's jurisdictional boundaries. I am aware its suburbs go on and on but those are different towns.


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Zmiinyi defenders: "Russian warship, go fuck yourself."

Berkut

Quote from: garbon on June 03, 2016, 09:03:11 AM
Quote from: Berkut on June 03, 2016, 08:46:47 AM
And to my point....the median price of the rent in the 25 largest cities is around 1/3rd the price of the high end. They are not comparable, and you cannot lump them all together as if they are basically the same, and this is ONLY looking at the 25 largest cities. If you go to the 25-50 large metro areas, I am sure that price fall will be a little more, although probably not much. I think the average rent in medium sized cities is probably near 25-50% mark of this list (meaning the 25-50% place, not amount, ie pretty close to this median, but a little lower).

So? You shouldn't actually expect them to be similar given that all things regarding pricing are very different across these cities. Much in the same that it is very different across areas all around the US. I don't see why average rent across the US is all that interesting given that really says nothing unless you have the context of salaries and prices of expenses in various places.

I think it is the only interesting data point in the general argument about the problems of affordable housing across the US. If the discussion is about housing prices in NYC and SF, then it isn't important. Which is, I suspect, the basic problem. The idea that there exists this entire America that isn't in NYC/SF/Boston/Chicago.

Of course you need to be able to compare that to salaries and expenses, but that is true for even your desire to pretend the middle part of the country doesn't exist. :P
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