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.
The American Dream, Twice Removed
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.
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.