There are many reasons to complain about the media but one feature often missed is how they pick the worst victims to spotlight. We have all seen this in local coverage where a criminal is shot while breaking into a home and the local news goes to his family for a comment, airing their grievances. The latest national example is from the intrepid reporters of the Wall Street Journal covering the all important ailing Boomer vacation housing market beat. The Boomers have no one to blame but themselves, but there are deeper social problems of which this is a symptom.
The WSJ weaves a tale of sad Boomers who cannot get $2 million for the large vacation homes that they built ten or fifteen years ago that they expected to live out their retirement in, and they are being forced to hold onto the homes or >gasp< reduce the price. This is an article completely out of touch with the harsh realities that face not only the poor in America but the working and middle class whoa re all one paycheck away from tough cost cutting. A $2 million home is not the victim of the week. It is an insult.
It is a window though into the consequences of every policy that America has pushed hard the last fifty years. This is not just a vacation home problem but larger family homes in many areas of the country. All of these articles dance around the problem, but now you can start to see why Boomers in blue states and even in wealthier zip codes in red states are all about high end immigration. They need the home buyer pool to expand.
Economically, America hitched its wagon to a finance based economy that pushed asset prices up via continuous monetary expansions and rate reductions. To paraphrase Minksy’s model, money went to the best borrowers with high scores first who then bid up prices on assets and then money expanded outward to worse and worse borrowers who bought at higher and higher bid prices. Those early receivers enjoyed asset gains while the late receivers enjoyed nothing.
The system needs the ever increasing gains so that people can also borrow more with home equity lines of credit and other instruments to keep the consumption game going. Homeowners from the high cost blue metro areas can use their home equity to buy property in rural areas as vacation homes, inflating those areas’ cost of living and freezing out first time buyers by bidding up prices (see Massachusetts using Maine as an open air retirement community). This ends up shutting out new entrants to the market unless they have diamond credit or both hold high paying jobs.
There is another element to this though beyond economics. Boomers have fewer buyers who are starting families to sell to. Who is going to buy a four or five bedroom house when they are going child-free? Do you need four bedrooms if you have one kid? Maybe there would be more buyers if Boomers had not aborted millions of kids. An atomized society does not need big homes for growing families. All one needs is a studio apartment in the city for that hive life.
The other problem is that the Boomers have created work and family environment via their divorce happy lives and the stripping of secure middle class employment that fewer people want the mental and emotional investment of owning a home. A home is a commitment and setting down roots. What flexibility does a home offer for their employment if a firm has shut down their office and said “move or you’re laid off”?
There is another social element that Boomers willingly enjoyed, which has now turned on them. The image with this essay is the infamous TIME magazine cover that called the real estate market top of ’05. Boomers turned residential real estate and their own homes into investments. They turned them into piggy banks that funded plastic surgery, vacations and consumption. This was due to the wealth of living in their nice suburbs. This was a Pyrrhic victory or blind alley though as by turning their homes into investment vehicles they neglected to make their subdivisions into real neighborhoods, causing a new generation to see suburbs as empty, sterile and seemingly dead areas. It did not have to be this way but Boomers helped craft the image of the neighborhood in no way except name.
This is part of the joy in reading these articles. Boomers bought and enjoyed a secular real estate boom that lasted from the late ’70s to today. They enjoyed much more steady employment with long service records, pensions and in some cases, retiree health coverage while no one today has that. Using easy money during the Greenspan bubble, they built these retirement homes with six bedrooms, why? Because they thought they would live healthy and with zest forever. Now, wishing the reduce their walking and go to one floor, they look to the rest of us to pay them off and snap up these giant eyesores for millions to make them whole.