Regular readers know that from time to time, I ask for comments on the signs of strength and weakness they see in their local economy. The last time we sought input, it appeared that the upper middle income parts of the country (suburban Boston, the better parts of Seattle, San Francisco and Silicon Valley, the tonier parts of Minneapolis) ranges from robust to smokin’.
While the plural of anecdote is not data, a local fashionista (which means she has a acute social trend antennae) and I both observed in a tight timeframe signs that the upper middle class in New York City are pulling in their oars. Her indicators included the Manhattan flagship Williams Sonoma store near Bloomingdales’ closing (and in the fall, when you expect retail stores to fold their tents after the Christmas selling season) and a very high end cashmere designer having a sample sale now, when they’ve never had sample sales prior to March. My portents took place when I went to my hair place, and a woman I see there only every other or third visit accosted me trying to get me to include her visit. And it wasn’t just that she pressed me to see her; there was an aggressiveness about it that seemed desperate. Similarly, when I went to a shoe store from which I only very occasionally buy shoes (as in the last pair I procured there was well over two years ago), and had settled on a pair, the owner came out and tried to get me to buy a second, even pricier pair. Mind you, this is a dog-whistle sort of store; I imagine their mainstream customer is the wife of a hedgie/private equity guy or a Wall Street Big Producer. I’m not their target demographic, but I do buy their simple loafers once in a great while because they are phenomenally well made, fit my difficult feet well, and wear like iron. So for the owner to come out and work on an unlikely prospect like me verged on being unseemly.
The top 0.1% are presumably sailing on unperturbed, for the most part. Russian oligarchs are constrained by the state of the oil markets and the ruble, but Chinese are sending money out of the country at an even faster clip than before. But what of our domestic top 10% ex the 0.1% that has done well to very well in our “new normal”? Even if they aren’t hurting, fraught nerves and curtailment of spending among the affluenza would have ripple effects through the retail economy.
Is this nervousness and spending pullback limited to New York City, or do readers see a change in mood in their communities?
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About time they started to worry !
Doing a bit of remodeling in seattle this month. Tile guys all busy busy busy and saying it’s just like 2007 at the same time customers starting to pull back. Yes anecdotal, but a lot of anxiety going around in the trades, everybody remembers the rug getting pulled out. Things would be cheaper if the fed hadn’t been so concerned with keeping them unreasonably expensive. Also, the winners who’s assets were restored wonder why we don’t have more money “you’re working, right” Sure, in one hand and out the other, and no paid days off (thinking back to labor day when all the computer guys and MBA’s had the day off with pay..and health insurance ha haa haa, no really everythings fine…) Lucky for me I read NC and so I’m not lost in the fog.
Seattle has become an extremely expensive city to live in, food, gas, rent and real estate (important things that conveniently aren’t calculated in the official CPI) are really high. You need a better-than-average job to survive.
Seattle scares me because, as a Portlander, I can, as John Boorman once said, ‘see the future and it doesnt work’. I had an extended visit this summer and stayed at an air b-n-b in a shiny new condo near the Space Needle. It spoke volumes that the owner was renting his left-for-college daughters’ rooms out to tourists. Beyond that, it just seemed like the place was on the verge of some real class based outrage over extravagent rents in the core city. The idea seems to be in Seattle and here in Portland to follow the example of NYC in which the central city becomes a giant gated community and the serfs are driven to the suburbs and forced to drive into the city to work menial jobs.
Funny you should mention that. Article in The Oregonian about the working class being priced out of Portland even with a building boom.
It’s interesting you say that.
As a Seattleite the lack of jobs in Portland scares me to death.
And, yes, Seattle can be expensive, but that’s not everywhere. Plus there’s a highly diversified economy and plenty of jobs. IME.
> “you’re working, right”
That’s how you tell if you are *not* rich. If you are rich you are leveraging, not working.
Boom and bust, the story of America, my friend.
At least you’re not renting…as I am. And with condos going for $1.0mm plus, I won’t be buying soon.
Cranes still going up all over downtown Austin. Condos selling at a fast clip.
Real estate in Austin is approaching Cali-style prices. See the above couple of comments about pricing out regular folks in the central city. Down here in San Antonio the real estate market is going gangbusters. We just got my mom to move to a resort-style independent living apartment for seniors, and during the estate sale, received quite a bit of interest and offers on the house, which is going for top dollar (but still much cheaper than in Austin). Lots of stories in the local rag about the decline in fracking activities down south, but not much evidence that this is hurting SA.
I have less direct contact with the hyper-wealthy but I have noticed a tinge of nervousness generally in the business press. As I see it there are five themes I keep seeing:
1) Stock wealth is taking a hit as China hits “snags” and the hot money flows seem to be less successful than they were.
2) Real wealth or consumer spending is not magically taking place as it was ordered to do under expansionary austerity and cheap oil.
3) The general public in many of the big financial centers has made clear that they do not care for the affluenza types as is shown by the popularity of people like Corbyn, Sanders, and Trump, politicians who might, heaven forfend, actually enforce the law.
4) The middle east source of all our magical oil is imploding in ways that are irretrievably bad for people and, worse yet for the very wealthy, bad for business.
5) All those nasty problems such as MERS that were supposed to be magically gone are not (see Seattle) and the dirty activists won’t let them go.
On the one hand Austerity didn’t work and with China hitting “bumps” it looks like worldwide stocks may be at risk. All of those people that bought into it to
I’m in Brattleboro, Vermont, and business seems normal, perhaps even robust. However, there are a high number of transients, drug addicts, and homeless for a town of 12,000, but I don’t know if that can be chalked up to the economy or the heroin epidemic, or the drug rehab center in town. I did have a chat with my realtor about the local economy, and she said that people are moving out due to the nuclear plant closing as well as some large businesses moving. You would think that would sink the local economy but Brattleboro has 4 bookstores, which is a lot for a town of 12,000. I talked to the owners and they all say that they do pretty well If the economy is in crisis, I don’t see it here.
Heroin addiction is skyrocketing. It is tragic. Bernie Sanders once said that only hopeless people stick needles in their arms and he is right.
Speaking of heroin. In SW, working in the hospital dealing with the upper middle class college kid dopers, good lord-what pains. Better dealing with homeless. Then in New England heroin appears to be the drug everyone is doing. scary.
The heroin epidemic can be directly attributed to the mass prescribing of Oxycodone and Oxycontin. Once people were addicted to those drugs, many local governments, realizing the situation, made access to them more difficult hoping to correct the problem. Addicts then had no choice but to use street drugs to replace their prescriptions. Unfortunately, street heroin has no measured dose or purity, thus leading to many overdoses. The drug has also become cheaper and cleaner as demand rises. Midway through 2015, heroin overdoses in King county (Seattle) are up 58%. Meanwhile in nearby Vancouver BC, (which has had a huge heroin problem for many years due to Chinese imports and corruption) prescription heroin is now available. http://slog.thestranger.com/slog/archives/2014/11/26/today-vancouver-becomes-the-first-north-american-city-to-prescribe-heroin-to-addicts-since-the-drug-war-began
I don’t have any online source for this, but according to author Ann Jones (They Were Soldiers), narcotics are now required to be prescribed for all pain/injury in the U.S. Armed Forces. Another drug company giveaway.
The “war on drugs” was never to eradicate the usage of “illegal” drugs. It has always been about “who” will control the supply, “who” will profit, how drugs will be used to control people, and control of the “criminal underworld”. It’s all about control….
I have a close family member who has worked for Family Services for years in Medina county, Oh. -a fairly affluent part of N.E. Ohio. She says herion use is way up these last two years in both the shrinking middleclass and poorer populations she works with. i think she would agree with both the observations about Oxycontin/Oxycodone and the dispair people feel leading them to herion use.
Fairfield County, CT
The .05% are doing fine as new _real_ mansion construction abounds. The rest of the 1%, not so much as their neighborhoods are forests of “For Sale” signs as they believe the top of the market is here and are likely moving to their retirement homes further south or selling off expensive assets. These homes regularly relist and/or sell for 2/3rds of the asking price 6 months to a year later. I’ve noticed quite a number of upper middle class homes that have been on the market, or now abandoned, for over 3 years.
I live in Oregon’s Willamette Valley. I have noticed that car dealer lots are overflowing. They are parking inventory in places it has never been parked before. One of our local dealers has had to lease space for their ballooning inventory.
The lumber mills have inventory stacked like it was early Spring, not the beginning of Fall.
The railroad marshaling yard is at between half to two thirds of what it was a year or two ago.
Auto sales, which is one measure of the economy, look good on paper, but that is measured by sales to dealers. “Lot stuffing” makes the numbers look good but the cars are not selling too quickly at the retail level.
I too live there. I am into Real Estate Porn (not proud, just saying). I have wondered at the ridiculously-priced houses this year, compared to the last few. There are many that just haven’t sold all summer, and over the past month or more, the 10K price cuts have started, pretty much every week or two many houses are cut another 10K. Lots of bank-owned low-end stuff starting to flood the market. High-end, beautiful houses that I have no way to comp have been for sale a long time so I am guessing that despite their quality and beauty (drool) are overpriced. They are not cutting as much though – I don’t know if that’s pride or a good business decision.
The cities of the flyover west that have water and white people are going along pretty well. There’s wreckage but it’s more diffuse, one-of-a-city-two-of-a-family like.
Interesting piece, but I take issue with your use of the word affluenza, which is a (mock) condition or disease, not the group afflicted by it.
I was thinking the same thing!
I don’t know how much this reveals, but I got a haircut last night that cost $18. In my opinion, that means the economy of northern Virginia is in decent shape.
I believe the affluent are getting nervous, though. Consider this article.
The center of Philadelphia is a mixture of obvious signs of hyper-gentrification (I’m a refugee from New York, so its easy for me to spot them), notably a big development being built on Market Street, and a steady but notable increase in homeless people.
That’s too bad. There used to be a lot of slack in Philly — I used to live in Center City, which sounds so Superman-ish — but it sounds like the local oligarchy is tightening things up. Sad.
I noticed that in center city Philly when I was there in July. I used to live in Queen Village (south of South Street) 2 decades ago. It was nice, in some ways, to see center city look more lively (they used to roll up the sidewalks at night). I have no idea what rents and such are.
While visiting my niece on the Main Line (posh de dosh), we watched her kids in a tennis tournament at their local club. All the posh moms sitting around me whined ceaselessly about taxes and how unfaaaair it was that their overbred rug rats didn’t have the latest and greatest of everything at their public schools. Like, the kids had to go to some other place to play soccer. The horror!!
My family members seem to be living very well there. I don’t think home costs are quite like what we experience in CA.
It’s interesting that you use the number of homeless as a proxy for hyper-gentrification. I would call it “apex gentrification” by the way, but that’s a stylistic thing.
In Seattle, I have to say there are not quite that many homeless yet, as say SF, which gives me hope….
Seattle is probably not a good indicator. Since Amazon moved to their South Lake Union offices, the area has expanded rapidly. 10,000+ high paying, high stress, self entitled jobs and workers have moved in next to the downtown core. Amholes! This has caused most of the nearby neighborhoods to gentrify at an alarming rate.
Meanwhile, on the Eastside, Microsoft is on a upswing moving more offices into Bellevue. Tech is hot… Seattle is booming.
Just came back from a trip to Seattle where construction cranes are everywhere, especially at the waterfront of Lake Union. The Duck Tours operator chalked it up to Paul Allen as if that explained anything.
On the home front in LA and OC, property is at an all-time high or close to it.
There are so many construction projects in Seattle that they actually ran out of cranes and had to rent some from Vancouver!
Seattle is booming in homeless families too. TentCity 3 changed their policies to allow families with children in the last year because the need was overwhelming. A few churches have begun to allow overnight (safe) parking– http://www.seattletimes.com/seattle-news/eastside/desperately-needed-safe-parking-spaces-for-homeless/. Apparently, when a homeless or soon to be unhoused person contacts a social service agency in the area, the advice is to “keep your car at all costs–if you have one” and she/he is given a pamphlet on tips for living on the street in the land of Amazon, Microsoft, Boeing. The pamphlet is free.
Reporting from Tucson, Arizona. I live and work near the University of Arizona. Am closely watching the resale real estate market. Seeing houses that, in some cases, have been for sale for over a year.
Also starting to see houses that were for sale, didn’t sell, and now they’re just sitting there empty. Did the owners walk away? Who knows?
London: visited “Mercedes Benz World” in Surrey (an upscale hang out for the 10%, car retailing masquerading as a theme park for adults) last week. The place was full of people splashing out on big ticket cars (the salesman I talked to said that the 2016 model year new E Class was on 16 to 24 week backorder already, there’s pretty substantial rebates on offer but customers are apparently going for top end trim levels and heavily optioned cars to counter this; the vast — vast — majority are financed, credit, which is now ridiculously easily obtained on major capital items like luxury cars with little or no deposits here in the UK so long as you have property and permanent employment status with either 0% or very low rate finance being part of the deal, interestingly as an aside this is in the form of dealer / vendor finance so reasonable quality CLOs must still be easy to clear in the wholesale credit markets).
Also the £200 or £300 “track experience” slots were fully booked out. That’s a lot to pay for a throw-away novelty. The function rooms were also fully booked with lavish wedding receptions being the main reason for the typical private hirer — that day the remaining suites not hosting wedding guests were taken by corporate events (healthcare, insurance being the corporations’ lines of business, quelle surprise).
This all coincided with my own observations more generally. The party is still in full swing here. Unless you’ve been priced out of residential real estate or don’t have a City of London salary scale job. At the other end, the pound shops are increasing in number in every town and you don’t have to look very hard to find real evidence of poverty. Bifurcated isn’t a strong enough word for what’s happening in Good Old Blighty.
Looks like the new One World Trade Center, along with the pencil towers around Central Park, have called the top again … just as the original World Trade Center towers did when they dumped 3.8 million sq ft of office space onto the market, months before Oil Shock I.
Good point. See The Economist on the “skyscraper curse.”
Orange County CA sounds similar to Fairfield CT. Lots of new Teslas and high-end luxury cars on the 5, and the megabucks new coastal development seems to keep selling. But a coastal development aimed more at the 10% keeps repeating offers to let me in on the ground floor! months after their intitial champagne sunset previews.
Berkeley, CA seems it’s normal self. Housing prices continue to go bonkers. I read a post on our local news site, sponsored by some local real estate company, and they had some data points that really surprised me, particularly around list price vs. sale price. The average sale price appears to be ~20% above list price, and in some neighborhoods of Berkeley goes as high as 30% above list price. And the YoY sale price increases in some neighborhoods are north of 50%. (http://www.berkeleyside.com/2015/09/22/home-truths-how-berkeley-neighborhoods-price-out/).The median sale price is $1,050,000 which basically gets you a pretty crappy house here. We go to open houses now and then, so I’ve seen the million dollars houses, and they need a TON of renovation.
From talking with people who work at our local bank branch, many of the buyers are from China and wire their money over here and pay in cash, above asking price. Go figure. I don’t think locals can afford to buy houses here. Thank goodness for rent control, or the rents would be untenable too. From what I see the rental prices looking like, I calculated that the YoY increase in rental prices is ~11-12%.
‘I don’t think locals can afford to buy houses here. Thank goodness for rent control.’
Has it occurred to you that the latter may cause the former?
Tell me more, tell me more,
How the free market will set it all right.
Tell me more, tell me more,
How the incomes will be eaten up.
Yes, it has. But in this situation, if most of the buyers driving up the market are foreign, I’m not sure that connection holds the same way.
Yea but an unlikely story, rent control COULD cause a lack of *rentals* maybe. But it’s California and the rental market is pretty divided from the homeownership market (they are vastly different income brackets and lifestyles usually). Now if rentals became scarce maybe people would have to buy but I don’t think that’s how it usually works. California housing is a bubble for reasons of it’s own, not just the bay area and Silicon Valley, but L.A., San Diego etc.. It’s hard to explain it all by rent control since I don’t think everywhere has rent control. Maybe it’s Prop 13.
The divergence between rents and prices is a prime indicator of a bubble, according to Dean Baker, one of the very few economists who saw the bubble before and predicted the crash.
Granted, in this case it’s partly because of rent controls. Looks like you’re on the other end of Chinese capital outflows. At least that’s dollars coming home. ‘Course, it’s also inflationary pressure here.
Housing prices aren’t inflation.
Source: Alan Greenspan.
Falling Chinese import prices are deflation.
Source: Janet Yellen.
Does anyone have an idea on how the “troubles in China” are affecting/may affect housing prices, particularly in CA?
I can’t figure out if big wig Chinese would be more anxious to get their money out of the country and into US real estate, or if economic troubles there would slow down the flight.
That’s my question, as well. It seems to me – based only on my “intuition” – that there’s probably some tipping point where the Chinese will stop buying RE overseas (they’re buying like crazy in Australia & NZ, as well). The tipping point may include Chinese currency becoming so devalued (I am a finance/economics moron, so may not be phrasing this correctly) that they can no longer afford to put out the cash for expensive overseas properties like they are now.
I can certainly get the allure for the Chinese to invest overseas, however. How long this can go on is the question. But if they paid cash, then they don’t necessarily need to rent out the property.
I saw somewhere awhile back that it isn’t so much money the new Chinese millionaires are trying to get out of the country (though it is that) as themselves. China has so trashed its environment in its rapid industrialization that it’s getting unlivable in places, and the unrest over poisoned land, air, water, and food, not to mention land seizures, is building to the point that the new industrial titans want an escape hatch for when they have to get out of Dodge.
I know I read that Canada had to tighten up its immigration rules specifically to deal with an influx of wealthy Chinese literally buying citizenship.
The vast majority of PRC territory is not badly polluted, even though what is polluted is serverely so. But the public infrastructure there is superior to anything in the usa: bullet trains everywhere that run on time, public transport, etc. Everything in place to keep a CEO’s worker bees healthy and happy.
The anti-corruption drive recently expanded to include requirements that corporate firms have members in the communist party, but that is not really surprising.
First class flights and goodies for the 1% also abound. Audi has a showroom in the Beijing Art District and who would be surprised if VW doesn’t go on sale there too!
Chinese parking money in Western RE is Chinese double-hedging (win-win). And it helps for getting visas if you own a fully paid for residence.
One troubling matter however is PRC government promotion of GMOs, but the organic food movement there is also strong and growing and has support among party members. You would think that a society with historical/racial memory of nasty famines would beware sterile seed industry.
More Berkeley: Lots of houses selling in the $1.5-2M “sweet-spot” are either reoccupied within two weeks of previous occupant move out or followed by a year plus of crews “redoing” things. One I walk past daily has had at least one crew every day for nearly two years. A unit in my building just turned over, the rent nearly triple the former amount. The mayor and most of the council love these new, improved prices. Transfer tax fees plus reassessment means all the decision makers living with those nice 1975 assessments aren’t called to task for not paying their fare share of the money they spend nor for the retiree benefit shortfall they deal with ostrich-like.
I watch the multiple listings here in Park City closely. It’s all resort, condo and second home sales. Prices have gone past the 2007 highs and sales have slowed a bit. There aren’t many building lots left in PC proper, only out in the county. Building hasn’t slowed down yet, but there is a sense of it all ending. It’s an odd feeling. Not like the 2007 crash – which was ignored until it hit us, more like knowing this frenzy is ultimately futile. Maybe I’m projecting.
susan the other, I’m just around the corner in Ogden. my email: pablo5z AT hotmail dot com— might be nice to chat.
In Utah County, I see lots and lots of custom high end homes being built. High end custom townhouses. High end custom condos and apartments being built. Rent has gone up hugely over the past 2 years. By at least a $100 to $150 each year. Maybe it is all the tech jobs in little Silicon Valley. I just can’t fathom that could really be causing it. Some of it is middle and upper class flight from Salt Lake County. The market is supposedly tight here for labor, but most of the jobs pay very little. Although if you lose your job it is a fight to find a new one paying close to what you were getting, often you have to settle for one paying far less. The middle class family that I have are very optimistic about things at least being status quo for them. None of them pay attention to things like the stock market etc.
I know people who gave up high end real estate in LA to shift to lower-cost high end RE + better “quality of life” (public transport, arts, downtown development etc) in SLC!
I suspect that NY is being hit very heavily by the high dollar relative to euro and the rouble, and by nervousness among the Chinese nouveau riche. I’m from Ireland, a frequent visitor to NY. I was there in February for a family funeral and I was shocked at how expensive it got relative to Europe – it used to be very cheap for Europeans. There were plenty of people on the flight, but it was very noticeable that on the way home, people were travelling mostly with small bags – a few years ago everyone would have bought large bags and stuffed them full of clothes, from basics to high end stuff. Its the exact opposite now as US tourists do their shopping on European trips. There is also a hidden trade in high end clothes going by mail to China – my Chinese friend in NY was going to quit her job to concentrate on her business – buying clothes to order for friends and contacts in Shanghai and simply mailing them there. She is still doing well, but the currency changes worry her.
As for Ireland, which as a very open economy tends to magnify global trends, the wealthy are doing well now – high end restauranteurs are complaining about the difficulty in hiring staff and lots of mid to high end restaurants are opening – but mid sized towns are in a very bad way.
San Diego is experiencing some serious rumblings/backlash against the “influence machine” and their backers. First started in the poorer district of Barrio Logan (Hispanic) who fought against the shipyard industry (think military, environmental pollution issues, etc.) and lost in an emotional almost ‘pitchfork’ battle.
Next up was a large development (One Paseo) in prime land in the richer area near La Jolla–that the “cashmere sweater set” of UCSD Professors, well-to-do and highly educated forces fought back against and won. Both sides well financed, expensive campaigns with lots of emotional testimony pro and con vs. another “in-fill” project–with no concern about traffic congestion, pollution, in this idyllic almost beach front area. They learned their strategies from the Barrio Logan fight.
Soon to follow, many other wins against the incumbent powers; communities defeated another “in-fill” view-blocking project in Bay Park (middle class); now fighting one in Lilac Hills (a large tract of strawberry fields slated for more development); an ongoing fight against a large Lifeguard Tower in Misson Beach; and the unwise placement of “rental bike racks” in several neighborhoods.
Add to this, the serious hedge fund grabbing of houses for sale in some of the the best neighborhoods with the best schools (Mission Hills) to turn into stealth rentals. (Here they buy the houses, move in “owner occupied” couples-who are in fact renters, and the “keep our neighborhoods” fight is afoot.
So, the anger is bubbling up against all incumbents and authority. The trust is cracking. And the jobs are even leaving Qualcomm. However, the “leaders” are still pimping for another football stadium (the Chargers seem to prefer Los Angeles—greater value for team) and the Republican mayor keeps promising not to spend any public money without a vote—while spending it on “quickie environmental reports,” and consultants!
And the Chicago Company has brought out the San Diego Union-Tribune (we get to keep the name) and the L.A. Times is running the print….but in-fighting there still to determine who is in charge.
In short, the many cracks on the glass table top are showing and the insiders are clueless.
So, Trump probably could probably draw a crowd in San Diego—and not just among Republicans! Trust has evaporated. And leadership almost non-existent.
In silicon valley I look at traffic and restaurants. Traffic is awful, not as bad as 2000 bubble yet, but heading that way. I frequently find myself stuck in traffic even at 7:30pm. Good restaurants remain full even on week nights. I think the valley is still super hot and getting even more bubbly.
However I have heard some evidence that the housing market might be cooling, but it is also the end of summer so that might be normal.
I’ve been a bit concerned about the same thing (belt tightening by the 5%), but for different reasons, as I am not much of a shopper.
I’m in the healthcare biz and have notices a big uptick in business solicitations in the past few months. Just today, I got an email from Regions Mortgage (which has the same logo scheme as Regions Bank) soliciting dentists/ doctors to obtain 100% financing – I’ve copied it below. The only requirement for this loan appears to be a valid employment agreement, and the applicant can exclude all deferred student loans from the loan qualification process.
Good afternoon Dental Professionals,
I know you have heard about 95 and 100% Doctor Loan programs. I wanted to let you know that they are now also available to you on both purchase and refinances!
**Dentist Mortgage Loans 100% financing!!!!!!
DMD, DDS, (NO PRIVATE MORTGAGE INSURANCE)
-We can also help with 2nd or Vacation homes…..Call or email me or Angie (See flyer info)
I live in the Appalachians. It’s not really an area the affluent flock to. We’ve got some middle income housing being put in as well as another shopping complex. Things feel pretty much the same here, we’re living in a perpetual now hiring zone for franchisees(apparently they haven’t got the memo that if you can’t find help you raise wages.)
Turn over is high, those signs are out to keep the stack of applicants fresh from the reserve army of unemployed.
Here in South Mississippi we seem to have reverted back to the traditional “it’s who you know” method of job hunting. There are almost no public ads for ‘real’ jobs. Jobs are now found through door to door, or web site to web site, pavement pounding. The only jobs being advertised are for “poverty wage” openings. For example, there are ads for nurses and orderlies for ‘assisted living’ old folks homes. By asking one of my daughters who is in that field, I find out that the wages and, er, benefits being offered are abysmally low by any standards. As she laughingly remarked about one ad and offer I read to her over the phone, “That won’t even cover the interest on the student loans you racked up to get the certification in the first place!”
Housing here is either very high, for here, priced or cheap rental quality dwellings. The home flippers I have kept in touch with all complain about the paucity of decent renovatable dwellings on offer and the collapse of the lower and middle mid class purchasing cohort. One woman we know has been sitting on a nice house in a solidly middle class neighbourhood for two years. With purchase price and remodeling costs factored in, she hasn’t received any serious offers that would give her a respectable profit margin.
The seriously well off for this region all live either on private estates, or in a few gated communities. One local notable, a former big time NFL quarterback, lives on a large estate well insulated from the outside world. The man himself is much more accessible.
If the affluenza are sneezing, it’s because the middle class that formerly supported them has caught something terminal.
San Jose is building like crazy, mostly high end condos but some “economy” studios near me as well. Three of the six small condos in my building are currently empty and the owners are asking truly outrageous amounts for small, outdated apartments in a rundown neighborhood. Traffic seems to be getting much worse. My friends that work at the well known companies (FB, Apple) seem to be tripping over piles of cash but the others doing more “backbone”-type tech work (OEM, capital equipment) are just getting by. Here in the South Bay there is increasing disdain for the Peninsula and SF culture and a lot of people I know are actively rooting for the bubble to burst.
Also from SV and concur with Oliverks (wasn’t here in 2000 so can’t compare). I’m not at the level of Yves, so I can’t speak to the ultra high end. Anecdotally, new cars are everywhere (the hot model seems to be new BMW 4 series — starting around $50K plus tax ~~10%) and MANY Tesla’s. “Luxury” apartment construction is happening in any empty decent sized lot – these are 1BR 1BA apts starting at $3k + (for perspective, my 2br 2ba apt I rented in 2005 for $1700 is now $4,200). Housing is crazy although I attribute this as much to a true shortage of SFR as to anything else. Restaurants are full (again, though, is that because people can’t or are too busy to cook).
Having said all of that but things feel like they’re cooling down. Now whether I’m projecting my own apprehensiveness onto the the general atmosphere, well, I just don’t know. Employment is good, but there’s no stability.
And there’s also a certain “shabbiness” to the whole place — roads are beaten up, infrastructure is OLD (notwithstanding PG&E competence — sewers/electric/gas is generally from the 1950’s or before and even the “flyovers” on the highways are 40 years old). Taxes are high but I wonder to what degree that Prop 13 isn’t REALLY taking a bite. It’s been 40 years — and there are still many people (and businesses) paying at a 1978 value + 2% per year. It’s no exaggeration to have two identical houses where the 2015 owner is paying 10 times what the 1981 owner is paying in taxes. And according to one article I quickly read, a parent can transfer a principal residence to a child without triggering a reassessment.
I think that there may be a feeling that (forgive the sports analogy) that we’re in the bottom of the 6th inning, not the top of the 2nd.
SF Peninsula — Similar observations to Berkeley and San Jose. Landscapers for the 10% can’t find minimum wage undocumented employees because they’re all doing construction / remodels / upgrades for newly-minted Tech titans or Chinese buyers on poorly-maintained homes all over the Peninsula. Established contractors are all up-selling to cash-flush 0.1% buyers and ignoring calls from 10%ers. Road traffic is monumentally horrible so Tracy / Stockton / Sacramento contractors won’t cross the bridges anymore.
Live in Sacramento, which tends to be more working/middle class with not a large group of those in the 10% or 5%.
Here allegedly “Democratic” Mayor (former NBA) Kevin Johnson brokered some backroom deal with billionaires to keep the stupid Kings in Sacramento. For that, the hapless taxpayers get to pay for a new downtown stadium. I walk past the stadium a lot, and it is definitely being built on time but looks rather small to my eyes (but what do I know), plus there is very very limited parking in the immediate area.
The whole thing seems crackpot to me, but we are constantly adjured with bubbling-ness about how this one stadium is somehow an economic miracle for Sacramento and it will magically bring jobs aplenty. What kind of jobs I cannot imagine.
In response to this, there has been apparently a big influx of ca$h in Sacramento (where from, I do not know but figure from Bay Area/Silicon Valley) to either massively rehab current buildings or tear down build new all around the stadium, as well as further afield. Some buildings to be quite high rise (for Sac-town) condos which cost a lot of money for this town. I am told that some of the earlier build outs have all sold out their high priced condos. I am guessing that the buyers are from the Bay Area or China and are probably paying cash. The price is probably cheap to them but rather too rich for the locals. What is to happen to these condos – who will be able to afford the rent? – is anyone’s guess. Locals say: oh they’ll be filled with highly paid Tech-types who’ll telecommute. Maybe.
As for single story homes, the prices aren’t quite at the stratospheric levels of 2007 (where I know a whole bunch of people who lost big time), but they seem overly heated to me, nonetheless. Home sales are meant to be booming, but I have, just of late, noticed more For Sale signs remaining on lawns for quite a number of months.
The general economy here – for working/middle class – is ok due to the number of govt jobs. People are doing “ok.” Rents aren’t stratospheric and if you look around, you can get a nice rental for pretty reasonable rates. Traffic remains about the same.
The one thing I notice is that the cost of groceries really seems to have risen more than the cost of living. Can’t put my finger on it, but I’m definitely spending more than I used to – seems like a lot more. I could find more ways to economize on groceries, but I’m not buying at Whole Paycheck or similar. Must be tough for families.
Not noticing anything else, other than locals more or less holding their breaths to see if the stupid stadium really pays its own way. Oh, and btw, event though there is some type of local ordinance that says parking fees aren’t to be used to pay for the stupid stadium, on street parking meter fees are set to go up quite a lot, plus the hours of fee assessment is going to be almost 24/7/365. Just great… not.
I might add that there still seems to be a lot of empty commercial RE all over the area – downtown, midtown (trendy), and all suburbs – some of which has been empty since 2008.
With the building of the stupid Kings stadium, however, a lot of smaller mom and pops were pushed out of business in the downtown area. Apparently commercial rents around the stadium are now skyrocketing, but it is traditionally an area where few businesses of whatever sort have managed to make a productive go of it.
While restaurants open all over town, others close, some of them long-term, well-liked establishments. Unsure what it all means.
There’s not a lot of high end, upper crust stores in this area, so I don’t know what retail is like.
Reporting from Boston. The explosion of high-end apartment construction continues apace, even as The Globe reported yesterday that the new Boston jobs are largely crap. In the South End where I live the neighborhood is deteriorating. Junkies in the park leaving needles (the cops more-or-less drove them out but the sketchiness remained), car break-ins (mine included), and now an armed robbery. Not horrible but things I haven’t seen in 10 years here. I don’t know that the affluenza are getting nervous but the effects of the policies that enrich them are now seeping into the real world where they live so they should be.
Another South End resident here. I see some empty (and remaining empty) retail space in what should be prime shopping districts in different parts of Boston, at the same time that rents are sky-high and real estate even more so and largely unavailable even at obscene prices. Reasonably well-dressed middle-aged people have stopped me on the street and politely asked for money telling me they are homeless several times in the past few months.
Greetings, neighbor! I have also noticed the changing face of homelessness. More women. People who aren’t obviously mentally ill or drug addicted (though plenty of those, too). Ex-middle class it seems.
I live in Washington, DC, where a brand-new, shiny super-high-end shopping complex was just constructed downtown in an area that used to have pawn shops, check cashing shops, and was a frequent locus for vice. I professed wonderment to a friend, because I still see small, mom-and-pop businesses all around town suffering and going under. This new complex includes a Gucci store (and a frou-frou restaurant that just got shut down for a week because about 70 people came down with salmonella; I’m trying hard to remain neutral and not view this as karmic retribution). My friend assures me that while he and I will never darken the doors of those high-end shops, they’ve done their research and determined there’s a market for the high-end shoppers they seek. The middle has been hollowed out in DC just like in so many other places.
It’s hard to get a read on DC because it’s just not a normal place. But it makes me sad that low- to middle-income families continue to be displaced. Around my neighborhood in northwest, I still see signs for 1-bedroom apartments for around $2,300 a month, which is ridiculous. (If I hadn’t been lucky to find a place decades ago before the housing market went insane, I wouldn’t be able to live in my neighborhood today.) Housing costs are still inflated here, and recently several small businesses have closed because the landlords requested rent increases they couldn’t meet. I’ve been wondering how the landlords like the returns on the vacant space and absent tenants.
several small businesses have closed because the landlords requested rent increases they couldn’t meet
Something like that happened to my tailor/dry cleaner in Cleveland Park. They were thrown our of their lease after 20 years. Same thing with the antique shop next door. It looks like the new landlord wants to combine the 2 shops and lease them as restaurant space. The funny thing is that there are several empty restaurant spaces just across the street. The problem is: the new landlords can afford to wait for years.
The tailor told me he would relocate further north but I haven’t heard from him. I guess it didn’t pan.
Definitely places are closing in Austin (Hole in the Wall, Dog and Duck, and others) because rent is going up so much the businesses become unviable.
As I’ve mentioned before, one of our acquaintances runs a health food vitamin shop in one of the ‘better’ strip malls here. Her story is that her ‘out of town’ landlord, a large property management company, keeps raising rents while several shopfronts sit idle. She is still looking around for a purchase option in the exurbs adjacent to the gated communities outside of town. She says that if she can find a dwelling with the proper zoning that she can afford to buy, she’ll leave the strip malls behind and not look back. (Two other people we have known in small retail businesses have done exactly this.)
Seeing everything from this in Brooklyn:
http://m.ny.curbed.com/archives/2015/09/14/are_too_many_pricey_rentals_being_built_in_brooklyn.php
To, earlier in the summer, this:
http://gothamist.com/2015/06/11/brooklyn_rent_obscene_forever.php
Finally, seeing this:
http://m.nydailynews.com/new-york/nyc-homelss-population-tops-59k-record-high-article-1.2099150
The current real estate market isn’t sustainable, but no one knows how long it will last and whether it will end up like the 70s.m
I read that the upper crust in Los Angeles are suffering from an image problem — the numbers of homeless people on the streets have swelled to such an extent (12% in two years), the City Council has declared a state of emergency. The Council is planning a $100M program to “help” the unfortunates. The hidden truth is the embarrassment of not being able to qualify the bid to host the 2016 Summer Olympics, and now the anticipated bid to host the 2024 Olympics being in question. All the affluent visitors would have to suffer while the wretched refuse of our neo-liberal economy are sleeping blocking doorways, begging along sidewalks, and urinating nearby. Most of the rich don’t give a damn about poverty unless it makes them look bad to their guests.
Can anyone imagine what having the Olympics would do for already horrible L.A. traffic? It makes no sense at all. The rich pride themselves on their Olympics, the homeless get driven out further and further from sight, and everyone else slowly loses their mind stuck in worse and worse traffic.
Wouldn’t it be interesting if the 2024 Olympics and a Death Valley heat wave came to Los Angeles at exactly the same time?
Up here in central Maine, my local economy is doing pretty well. The university, through its lowish tuition and reputation as a party school, has increased enrollment, but has refused to build any new dorms, so we end up with privatized dorms and revenues going to out-of-state private equity. Nevertheless, the local builders profit (even if these dorms net out negative for the town, as TIFs) as do local restaurants and bars (some of which, to be fair, are nice brew pubs), with the only real downsides being more money spent on policing and the occasional pool of vomit downtown. Another consequence of increased enrollment is that the parasitical but highly paid administrators are doing well (while the adjuncts who perform the university’s actual, or at least historical, function are doing no worse). So local speciality shops are holding their own or even expanding. We still have vacant stores downtown, though.
However, Maine is, as it were, high on the beach; if a wave of prosperity hits us, that’s a sign that the wave is about to recede. Of course, a Maine bear would think that.
Hattiesburg is somewhat of a ‘party school’ too. We are nearing the completion of a major dormitory building project. Almost 1500 beds were added. This school has roughly 16,000 students now. At around $100 million, this project has been big for this area. Most of the contractors were from out of town, with a large portion of the workforce being Hispanic. (I personally passed on some hilariously low ball ‘Golden Offers’ to work as a plumber there. The dollar wages offered were very close to the dollar wages I earned in the early and mid nineteen nineties. Oh, and no benefits whatsoever.)
With global warming, watch out. The beach will soon come to meet you.
I’ve finally figured out why neoliberals don’t worry about global warming and sea level rise. It is received wisdom that a rising tide floats all boats. So, not to worry, do the backstroke.
Morris County, NJ
A high-end suburban county. Lots of 5,000+ sq ft homes that cost $2M and up. Lots of Tesla, lots of German brands, Bentleys, exotics. The houses sell and the private schools are full.
A place of bright joy and hope for the future.
But not really, and the reasons are not clear. It kind of feels like everyone sits home and watches On The Beach every night
Affluenza is a joking term for “the disease of being rich,” and a disease can’t be nervous. I suggest “Are affluenza sufferers getting nervous?” if you don’t want to just say “the affluent.”
From Louisville in Boulder County, CO, upper middle class suburbia, real estate has risen 10% each of the past three years. A regular 3-4 bedrm 80s vintage home is now $430-500K. Faux “luxury” apartment development renting for $1500-2000 continues apace as well as luxury new townhomes and single family homes in the $600-800K range. Restaurants continue to open, close, repeat. The Best Buy at the nearby fancy mall closed. Everyone seems to be employed and some small business employers are complaining they can’t find employees for their crappy, part-time contract jobs. The nearby town of Boulder tells a similar story except more extreme high density development, more traffic, and hyper real estate appreciation.
NYC: constant crushing of small businesses by landlord gouging, reminiscent of pre-2008. This started a while back but has since become epidemic. On the corner where I work, a Korean deli that did a huge business got hit with an insane rent increase and bailed, now it’s a 24/7 Subway. A cake shop extorted by its landlord (a certain university) drove the owner so insane that she killed herself. Some storefronts remain empty for months or years. Small shops do sometimes appear in ultra-gentrified areas selling T-shirts for $400. Does anyone buy them? Or they might be money-laundering fronts.
Downtown San Francisco – acquaintance had a smallish store for 15 years. Rent was $3k/month. Small office on 2nd floor (Allstate Insurance agent). Lease expired – landlord wanted $10K for both spaces. Probably 1000 sq ft on the first level.
Acquaintance left. Probably end up as another restaurant/coffee bar.
It really is bad as far as the growing number of empty store fronts that sit for weeks, months and years.
Saw the same thing happen here in Tucson. A group of artists were kicked out of their studio, which is just a few blocks away from our hip, happening, and rapidly gentrifying Downtown.
Well, that was late last year, and guess what. That studio space still has a “for rent” sign.
I’ve noticed this too. There are two vacant restaurant spaces on either side of 7th ave in lower Manhattan near where I work that have changed hands more times than I can count since I started working around here 8 years ago. I think the spaces are cursed. I’m pretty sure both are vacant right now.
In Seattle, rents are shooting up. RE in general is above crash levels. Tech is hiring. Traffic is horrible. Restaurants full.
My inbox is flooded and I am getting 2-3 calls a day for (banking ) contract work. That may seem like a sign of a good economy, but in fact, is usually a tell-tale sign of massive layoffs and/or reluctance to hire full time. And former finance colleagues who scoffed at my jumping to a different industry (thank God I got out of the syndicate alive) are now begging me to pass on their resumes. Something is going down.
In upstate NY, the economy just seems to be in equilibrium. House prices treading water, increasing with the very low inflation. Little hiring but not a lot of laying off either. People replace things like cars, appliances etc. when they need to but not before.
However, I sense that our client base (Fortune 100 and governments) are clearly pulling in their horns and cutting costs (spending) and building backlog is much tougher now than it was a couple of years ago.
Albuquerque, New Mexico is an economic backwater at the best of times, not much affluenza here… but I thought this article captured several local themes (and some neoliberal memes):
http://www.abqjournal.com/640346
Which is of course absurd: the “unbanked” currency is used for direct cash transactions, expenditures which are overwhelmingly made in the local economy; apparently this no longer counts as “consumer spending”, at least for bankers. Cash transactions are commonly for rent, utilities, local services, etc.
Used to live in Albuquerque, but it was abit of boom town then.
Speaking of “unbanked” (we bank with a CU): we own a fairly affordable rental property. At this point, BOTH of our tenants prefer to pay cash, which they do at a convenient branch of our CU. Works well for both of us (each unit has its own account – lesson learned). One is a farm worker; but the other is emphatically employed with a contractor, so I wonder a bit. Not that I would ask.
Paying cash for utilities would be more complicated, though possible. Of course, this is also apropos of the low rate of work force participation. What ARE those people doing? Was there a huge expansion in the underground economy?
“What ARE those people doing?” That’s a very interesting question and, so far as I know, nobody has tried to answer it.
If my neck of the woods is any indication, a lot of these new poor have moved back in with family or created mini communes to share rent and expenses. Many of the local apartment complexes have very specific policies about discouraging the sharing of units. One place where our son shared a unit with a female co-worker, they were told that only married couples could share a bedroom. None of this is put into writing for obvious reasons, but the point is made. Also, there are the ‘retirement’ complexes where children are barred from staying with parents and grandparents. One small subdivision in Slidell LA that I did some work in had minimum ages for living there. No kids or grandkids allowed.
The local hobo jungle is still out of town ‘in the woods.’ We will see pan handlers at certain corners where the traffic has to stop for a sign or light. They are usually ‘allowed’ an hour on the corner before the police roust them. Recently, we have seen families sitting in a car or van with the cutest or most winsome family member standing on the corner holding the “Help! Our daddys job was exported to Mars! Starving family alert!” sign. As others above have observed, the homeless mix is trending towards families and obviously former middle class as a larger and larger share of the total as time passes.
When I suggested to a crowd of coffee shop regulars that the City expropriate the old Howard Johnsons Motel, closed since the bankruptcy, on North Hwy 49 and turn it into a homeless family shelter, I was booed down and called all sorts of unpleasant names. I am used to this by now. What is making some of these middle class stalwarts pissed of, at me since I predicted this a few years ago, is the uptick in break-ins and robberies in the inner suburban ring.
Life goes on.
I don’t think that’s completely un-answered. When more people are working part time jobs, they either have to work several positions, or take side work, the latter having a greater likelihood of being off the books:
Ratio of Part-Time Employed Remains Higher Than the Pre-Recession Levels
It may not be directly tracked; but it must be happening. House-cleaning/sitting and domestic assistance, light home maintenance/construction (possibly unlicensed), under-the-table employment in small businesses, private used-car sales and used-car flipping, direct sales of farm produce, and as one goes deeper, fraudulent and illegal markets like drugs (pharmaceutical and non-pharma), inspection/licensing fraud, etc. Business models like Uber/Lyft don’t get that much traction here because they are credit card based.
Another correlation would be to credit; people who don’t have good enough credit to have or maintain credit cards (or get a decent rate on them), will end up paying pretty much everything in checks or cash, and the ways banks punish overdrawn accounts/checks, some people just go with cash.
Also, homlessness forks a separate economic stream, this has certainly not been studied or tracked in any great depth, but again would be inevitable. Homeless people have concerns with things like a safe place to keep their checkbooks. And for exchanging goods/services with their community peers, checks are pretty much out of the question; credit cards not even in the picture. Keep in mind that “underbanked” means having two or fewer accounts (typically one checking, maybe one savings). It’s banking industry speak for “they don’t have any credit card or investment accounts”. And in at least some significant number of cases, the “underbanked” in question do not have sufficient credit scores to get credit card accounts.
As noted (but under-examined) here: US Credit Quality Continues To Climb – But Will It Level Off?
In other words, they’ve been absented from the banking/credit economy. Raw numbers behind the percentage stats would allow at least a spitball analysis by comparison to raw population, but those underlying numbers are harder to come by.
I was thinking of buying some Edward Green $1400 “Inverness” shoes but chickened out, partly due to my lack of easy money made from a 10-bagger.
I bought Crockett & Jones $700 “Westfields” instead.
They’re still pretty awesome. But that’s fully 50% less than I was thinking of paying.
If everybody did that, half the economy would disappear. Jesus. Would that pull the other half of the economy down too, leaving nothing but the earth and sky?(oh and the moon, it would still be there no matter what)
Probably. But you never know.
This calls for a celebration!
Get some good beer (Russian Imperial Stout), or red wine, if you must.
Here’s the Steve Martin Happy Feet skit to celebrate with. Ola!
https://www.youtube.com/watch?v=xnksquL557s
Oh my. I’ve bought automobiles for less and driven them home. At least you don’t have to change the oil every few months, do you?
As for this poor groundling, I recently had to purchase new walking shoes for around the town chores. I found some cheap Chinese walkers with leather uppers on sale for all of $7.50. Basic black and exactly my size. Sure, those “Westfields” will be listed in your will as recompense for years of bad stock advice to your favourite broker, but, at what price? I can sense the plot outlines of a ‘haunted shoes’ story now. Here’s hoping that broker ‘friend’ of yours doesn’t wander too close to any cliffs or rooftop pool deck while wearing your “gift” shoes.
Jeez, $700 will get ya a private eatable lingerie party with a dozen craazed Mexican stripper hotties.
But I’ll concede the shoes will last longer.
I ride the bus.
Touche!
“A hit. A very palpable hit!”
Just goes to show you that even those with money can have no taste.
Dallas seems to be slowing since oil prices have stayed down. I put land on the market last December and will close next week, approximately 75% of what I had hoped to get before oil burst. Visiting relatives in Silicon Valley last February, my cousin’s wife mentioned “all the free money around”. My sister and I have worked as RN’S in texas all our lives, haven’t seen any free money, although real estate in Texas has increased with inflation. My grandparents raised their family in the depression and their grandparents were survivors when their families were starved to death in Ireland. So I know how to save. And with everything paid off and a small early retirement pension I hope to watch the demise of capitalism from a safe distance. With interest rates at zirp, how will the Fed push on the string now? Heaven forbid we stimulate the economy and velocity of money by giving gainful employment to the masses. We are all turning Japanese.
My take on Dallas / north texas is that the services sector has become such a major force that the oil / energy downturns, when they happen, are somewhat dampened (in comparison to Houston).
Between State Farm opening their huge campus and the relocation of Toyota north american HQ, apartment rents where I live have only gone “whooosh” straight up.
I don’t live in luxury.
Several years ago I shamelessly Zillowed the home of a former sister and brother law who had just hosted my (grown) children for Thanksgiving. The home is located in, even for Newport Beach California, a very expensive area. At that time, they had recently (unsuccessfully) marketed their property for $10.8 million. I had “saved” the house as a “favorite” so that Zillow would, henceforth, do my stalking for me. The home popped into my gmail this week with a lowered “Zestimate.” Lower indeed!
The home, which used to Zillow for not too much less than the $10.8 million asking price, now Zestimates for a (paltry) $4.2 million.
Although I have not known these former relatives for a while, my children have occasional contact with them and have remarked that (their aunt and uncle) are just “nastier” and more bitter about their view of the world than my children had remembered them being in the past. Indeed, as I remember them, they certainly would have been the type to have gone and “levered up” and accessed the equity in the home when it had appraised for much more. My guess is that they did–and that they’re now “stuck” there. (That is, if one can be “stuck” in a 7 bedroom, 9 bathroom “villa” with a sweeping view of Newport Harbor.)
As an aside, I just thought I would mention how they “amassed” their wealth. (Well, real estate, obviously,) but their base income is from a company that they started which supplies low-quality food to some of California’s prisons.
Ick. Just…..ick.
Last week, the SPCA had a news article on the local TV networks about how Niagara Falls now has more feral cats than humans living in it. And the humans aren’t doing very well. Walmart, however, is booming. We do have some economic activity from canadian tourists, but that’s it.
We’ve never really recovered from the recessions of the 70’s. or the 80’s. Or the 90’s. Or the ‘aughts. Every one of them has been a jobless recovery for WNY. (western NY). Manufacturing is basically gone, and everybody rents.
I dunno how the upper crust is doing since none of them live here. They made money here and moved on.
Bring on the deflation baby.
The high-class shopping malls in Hong Kong are in the Landmark and the International Finance Centre. As a general rule they have been well patronised by buyers from the China mainland until quite recently. They sell mostly garments of indifferent quality but with expensive labels. They also sell designer jewellery, watches and leather bags.
Nowadays the shops are generally empty and the staff stand around in their black uniforms with nothing to do.
These shops are tax efficient. The famous brand brings its regional income back to Hong Kong and the high rent of its shops here is set against its liability to tax. That rationale to renting a Hong Kong shop continues but actual business (in the shop) appears to have collapsed imo.
There is street-talk of Chinese money being exported. Anecdotally civil servants are being targetted for foreign residency and passports by financial intermediaries of European banks. They have to invest several hundred thousand dollars.
Finally you will know that Raymond Baker’s organisation “Global Financial Integrity” has just published a paper on global illicit financial flows. Baker is a hero of mine for his book ‘Capitalism’s Achilles Heel.’
Planning a trip there soon. Hopefully the global economy can hold together just a fewww mooorre months
(Also, thanks for the book recommend; looks good)
I’ve worked in Santa Fe NM art galleries the past few years, watching their continuing struggle to recover from the recession. Art here is medium to high grade but nothing like the chart busting pieces of the auction houses. Reports I’ve gathered show that so far this year, while the highest end galleries have done well, for most others business is flat or down. Personally I’ve had many instances of enthusiastic responses, including promises to purchase, which then disappear. My sense is that many people accustomed to buying art in Santa Fe are holding back. There also has been a flurry of retail closings this year, many higher end and/or long-time establishments. Home sales are up a little but prices are mostly flat. Next year the city is facing a major budget hole.
Doug,
Have an off-topic question about a NM artist. Any way I can reach out to you?
Thanks
doug@gvgcontemporary.com
Mason County Washington here, have a 5-acre plot of land owned free and clear with 2 10×12 cabins (hand built) and some random outbuildings – including a charming little treehouse – on it. Solar panels provide power, a creek provides clean water, the tall tall trees provide oxygen and occasional firewood, and the chipmunks/deer/bunnies/jays/ravens/owls/mountain beaver provide entertainment.
Haven’t noticed real estate prices going up, since the sign on the local real estate office at the base of the mountain fell over in the windstorm lately…but I’ll bet they will get it back up soon.
Not noticing sales of Teslas or BMWs increasing, but bikes seem to fill in the gap nicely. Those, and old beat up pickups, Subarus, and the occasional snow machine in winter. I think Gus down the gravel road from me was thinking about leasing a new Kia so there is that.
Affluenza? Dunno, you can’t fit the behemouth campermobiles up the dirt road too far so they don’t seem to get up by me very often. I did meet someone at the store buying a bottle of $15 wine, so there must be a few rich peeps trying to gentrify the area.
All in all, pretty mellow. If the whole system is gonna come crashing down around us….well….I dont really care! ;)
Cheers!
Here in Jackson Hole if you can afford to buy a home you are above being concerned about minor things like interest rates or how much it costs. Such worries are for the little people.
Just toured a house under construction designed by the leading architect in the region. 50 percent of the walls are glass— this in a region where -30f and 6′ of show is common in wintertime. Interior is a maze of small cubicles suitable perhaps as jail cells, but certainly not as comfortable living spaces. Guaranteed to be on the cover of Architectural Digest because of its brilliantly innovative roof design that has an inverted pitch with a slope toward the middle of the house. Price to build about 25 million plus 12 million for the lot.
There are several hundred such “cabins” in the valley and at least 20 new ones under construction.
At most there are five rental apartments on the market at any given time at a price of $2,000 to 3,000 per month. In the summer several hundred workers live in their cars, while the remainder commute over a 9,000′ high pass swept by two major avalanche paths in the winter.
Even though the Masters typically only live in their palaces for a few weeks out of the year, they are in trouble. Hard to get the shrubbery trimmed and the snow shoveled off the roof when you refuse to pay more than $12 per hour—-. The newspaper has 8 pages of help wanted ads — with perhaps 10 that pay over $15 per hour. If Trump gets his Southern Border Wall there will be nobody to pick up after the Masters when they throw last night’s party dress on the floor and the restuarants will have to ship their dishes to Salt Lake to have them washed.
And to think I went on a skiing vacation there once. I feel so left out, now.
Paper plates?
Yes! Paper plates decoupaged with dollar bills! You’re on to something. I feel a business model coalescing from out the fervid dew.
funny how that suppressing inflation to just mean suppressing wages while ignoring volatile food, energy and now housing costs leads to food insecurity
http://www.presstv.ir/Detail/2015/09/22/430306/Canada-Toronto-report-food-insecurity-poverty
let’s go back to having malnourished children which may remind some of the lead poisoning epidemic caused by gasoline and paint
Over here in NB, food insecurity is running about 7% of the population.
Feedback:
William Sonoma has been in a steady decline for several years. When I go to the one in Brentwood, I see a steady decline in the level of inventory. Attempted to make up for this by putting consumeables in place. WS really out grew their customer space.
However, having spent the last year and a half almost all on the road the prices of hotel rooms are down and it seems very easy to get a room. It was easy to get a room in Flagstaff at a cheap rate over Labor Day weekend. I was shocked.
Restaurants between LA and the south central US seem off to very off. There was an article in the local paper today say that hotel rentals are way off. I had a waitress I have known for years bitching at me for 30 minutes about their business being off. The oil patch is really being hurt by low oil prices.
I am doing work for a Fortune 500 consumer company. I got to looking at their financials and was shocked how bad they were.
I pull into a gas station to gas up. Their is a rather new caddy sitting in front of me. The hood is up. I am gassing up and a lady fairly well dressed gets out of the passenger side and comes over to me and starts the usual speel when someone is going to ask me for money. She goes on for about 30 seconds before I cut her off with a “Sorry.” It took her a second to realize that I had just told her No before she had even got through 10% of the story. She gave me a look like she would like to kill me and take my billfold and turned around. Hey I drive a fairly old truck but I keep it mechanically topnotch. I am wearing holey jeans with a T-shirt and you get out of a fairly new caddy and ask me for money.
Lots of people all across the SW standing by the road asking for money. I saw two pregnant women, a meth head and lots of broken down drunks and druggies. I have driven this for 10 years and the numbers have ramped up to multiples. Albuquerque continues to live up to its reputation of a dying city by a dying river.
Luckily my business has stayed robust but in the last couple of days future projects were cancelled.
Things are topping.
Ish
The generational shift in so called baby boomers moving into retirement years say 65 and over is now beginning to hit those born in 1950 which is the beginning of the large upsize within the so called baby boom population. Lower spending,downsizing housing and taking care of elderly family members replace the heavy consumer buying habits. This population shift is still in its early years but probably already a factor in consumer demand.
One more quick data point — just received an Allen Edmonds Sale Catalog in the mail (mid-high end shoes). Last time that they had a sale (that I remember) was 2008.
craazyman always buys high and sells low.
Considering the gents imbibition habits, the “Craazyman Cocktail,” I suspect another kind of polarity is at work.
Ed S., thank you for the heads up on the Allen Edmonds sale catalog that you just received. I love a good deal on high quality leather goods. (Apologies for the digression. I love a good deal in boom- and bust- times.)
I just heard that Uber headquarters are going to go up in Oakland, not San Francisco. That is because the boom in SF has hit the stratosphere and there is spill over. I hope this goes on for long enough that Oakland really benefits. SF is insane right now. Cranes all over – really impressive given that it is hard to build. I am in the start up community and I have not heard any rumor that money is harder to raise.
I live in Oakland, and I can’t say I see how Uber moving in will be a benefit to the city.
Housing is already insanely tight here: blah two-bed apartments in 60s buildings rent for $2000-3000/mo. On the sales front, an extreme but not unusual anecdote: last month a two bedroom fixer-upper needing $30k of termite work in my parents’ not-fancy north Oakland neighborhood listed at $599k and got 4 offers over $900k! There are Porsches and Teslas parked next to weed-strewn lots because even wealthy young techies can only find crappy apartments. Basically if you have rent control (like us) or a house purchased 10+ years ago, you can stay but never move; if you’re looking for a place you’re screwed even if you have money. Where will they put 2000+ Uber workers?
As far as the rest of the city: I’m sure the thundering herd of Uber-menschen will spend a lot of money on $12 cocktails shaken by the prehensile tails of bartenders with faux-Victorian vests and pretentious moustaches. They will also eat a lot of artisanal meats smoked on exotic woods, and crow about ‘discovering’ $30/plate restaurants that opened two years ago. Perhaps those apps that send servants to your door to do trivial tasks will expand to Oakland too! Oh boy. Net benefit: dubious.
The rest of the economy: things are veeeery hot in some corners but good jobs are scarce. Our business, which is a branch of environmental consulting, is pleasantly busy due to the building boom. Construction firms are double booked, and good luck getting a surveyor – I had to wait 2 months to find someone to do a 2-hour survey this summer. Prices are also booming, so if your industry does not have increasing salaries – or if you are a less-skilled blue collar worker – you are increasingly screwed. At the same time, I also notice the proliferation of sales at weird times, especially at mall stores. I guess if you spend all your money on housing, you don’t have so much to spend on anything else.
I’m rooting for a tech bubble crash too, though I’m not entirely sure it will ‘fix’ anything – especially not the attitudes of some of our more entitled brogrammer friends.
I left Oakland a year ago to return to Seattle.
I must say, it was hot hot hot. And that for–with respect–a dump of a city.
It’s beyond me why people continue to move to San Francisco/Oakland. Yes, there are jobs in some sectors, and they pay well. Yet…the cost of living is so insane as to eat up any and all earnings.
It’s truly ridiculous.
I moved to Colorado by choice in early 1978, & never intended to leave. I loved it, & still miss it.
I was forced to leave the state I’d called home for over half my life, however, when Chase Bank stole my ranch/home of 20 yrs in the mtns, in 2011, evicting me (still trying to fight on my own), in Jan 2012.
I was current on my mod pymts on a $140,000 mtg when they were already foreclosing.
They took it from me & sold it for a mere $65,000 in the Fall of 2012!
41 fenced & cross-fenced acres, excellent well, septic, horse setup, outbuildings, nice mix trees/pasture, bordered state land, great access, but secluded, old log cabin (my home)…..
Find ME that deal!
I doubt you can find an acre there for that now. Or even a couple years ago. Seriously.
I’d gotten approval back in the early 90’s for a B&B, for hunters & fishermen. Spent tens of thousands remodeling, so I could do that in my retirement to supplement my income. Choice area for it.
Since marijuana became legal, they’ve had a huge influx of people to that state. Housing prices & rents have gotten astronomical. Wages, not so much.
I hear from friends in construction back there that business is booming. Especially for “second” homes. “Vacation” homes.
I couldn’t even afford to remain in the state I love & had called home for over half my life.
I currently live in a very poor, rural area of New Mexico, where there’s no jobs (no people or towns), & you’d expect land to be cheap.
Not so, even here.
I live here because friends found me a place to rent that allowed my best friend (my old, large dog), & I could afford it. (There’s a reason it’s so cheap. No BR, no septic…)
I couldn’t afford rent anywhere in CO. I’d lost everything.
I can truly never go home again, since my cabin was razed by the “new owners” (clouded title!), no doubt to make way for a vacation home.
While us victims can’t even afford ONE home. Especially in this insane market.
My son & his wife still reside in Denver, where they’ve been renting for 7 yrs.
They looked at homes, & even with their good jobs, they’re out of reach. (Median price of $435,000 last I saw).
Rents are outrageous, too, anywhere in the state. (Fortunately, they’ve rented from friends for all that time, so their rent has remained low, but now they couldn’t afford to move if they wanted to).
I want to go “home” again!
I remain disgusted with THE govt (I have a hard time thinking of it as “my” govt anymore), for allowing the banksters to get away with their criminal activities for years while hundreds of thousands of us (it’s now MILLIONS), were crying “foul”.
But it’s worked out great for those making big bucks, hasn’t it?
They can now afford prime land for their second homes!
OUR homes.
I should mention I’m a divorced female turning 64 next mth.
It’s hard enough at my age to start over with nothing, but in this housing market, it’s all but impossible.
Gotta love/hate Manhattan — in which even if you’re a 1%-er you’re just another shnook. This manifests in every way in the “local” economy; it’s the type of commercialism that so ubiquitously and constantly seeks to drive at one’s wealth/status insecurity. It was so bad that I had to move to Brooklyn, which is not so much better though it’s still worlds away in terms of wealth and the type of culture that fosters.
I work as a real estate agent and moonlight as a Lyft driver in Seattle, and here are some various observations that may or may not be relevant.
The real estate market is really hot here, but inventory is very low, so a lot of real estate agents are actually having a rough go of it. Times are great if you have clients who want to sell – Seattle real estate is appreciating perhaps even faster than it was in the pre-2007 bubble (it peaked later here than anywhere in the country). Big difference is that rents are also exploding this time, whereas in the pre-2007 bubble rents remained fairly calm.
Amazon is hiring an insane number of people, and I think that is the biggest significant variable in how things are going and will go in the future. We currently are having a massive building boom, but if Amazon unexpectedly slows down hiring, a lot of developers are going to be finishing a lot of apartment towers without the expected high-paid tenants showing up.
There is a great deal of frustration, and I think pent-up anger, among non-techies (and most anyone who has lived here a while) about how the huge influx of Amazon employees has driven up the cost of living and radically changed the character of the city.
I drive (mostly at nights) for Lyft, and the past month or two I have seen a noticeable drop off in business and the nightlife areas in town seem quieter than usual. This is corroborated by conversations I have with bar and restaurant employees I give rides to; most of them are telling me things have been slow. Not clear yet if this is normal seasonal variation or not, but it seems odd to me.
There was a huge population of homeless sleeping in various areas around the edges of downtown, but they mostly vanished a month or two ago, and I have no idea where they went. I seriously doubt they all suddenly found places to live.
In most conversation I have with customers (either real estate or Lyft) people acknowledge the boom and quite a few are benefitting from it, but most people seem to be wondering how it is going to end. My guess is that the majority are afraid that this all ends in tears.
I’ve seen quite a few desperate Tucsonans wanting to become as Uber drivers. Can’t say that they’re making much money, but I don’t think that’s the point.
What is the point? To make more Uber-bucks for the company’s founders and investors.
Here in Wausau, WI, we (like much of the State) suffer from some sort of schizophrenia. On the one hand, the restaurants are consistently full; there are plenty of new Audis, Passats and Accords on the roads, and the there is a 5 year wait for vendors to get a booth at our farmers market. But on the other hand, shops in the mall are still closing; the job market is essentially non existent and the most common vehicle around here is the Pontiac Vibe. (Yes, I know they stopped making them years ago.)
It definitely feels like there are some of us who are doing OK, and then a much larger group that are desperately scraping by. Haircuts are $14.
In Nassau County (Long Island, NY) residential remodeling seems to be increasing, house sales in the $300-500,000 range are steady to increasing, and large ticket houses ($1.5-4 million) are selling fairly quickly. On the other hand, the availability of decent paying jobs is way down, property taxes are ridiculous, retirees (mostly Italian or Irish) are moving away due to the cost of living and taxes, and many of the residents who live in high-priced houses couldn’t afford to buy them at today’s prices. Infrastructure (roads, railways, utilities) is crumbling. Considering the price of everything, I think it’s somewhat paradoxical that new residents tend to be members of minority groups (e.g., Latinos, blacks, East Indian, Pakistani, etc.) and I have no idea how they are able to afford living out here. I don’t see a vibrant future for Long Island.
Not sure how useful my comments will be. The following observations cover several years. The Saks Fifth Avenue in downtown Minneapolis closed. Neiman Marcus previously closed. The downtown is down to one big store: Macy’s. There is still a lot of building in Minneapolis: high rise apartment buildings. I live in St. Paul. The Macy’s here is being replaced with a Walgreen’s, a couple of bar/restaurants and a practice rink for the local pro hockey team. The process of converting downtown St. Paul office buildings to apartments continues. Historically, Minnesotans buy houses, rather than renting. So the increase in rental property is interesting. My sense is these new apartments are on the high end, though not expensive by coastal standards. What I’m mostly aware of is the hollowing the middle class. Dollar stores keep proliferating. Products that used to be targeted at the middle class have gotten much more expensive and now must be selling to more affluent people. (I’m thinking of my hair and skin care products and a leather goods store I used to like. Prices have doubled and tripled. The last time I bought a bar of soap it was $18.) Are the really rich worried? I can’t tell.
For many years in Manhattan I had a back stage pass to the show and been in hundreds of apts and houses of the aspiring 1%, 1%, and less than 1%, and saw up close the mindlessness mass materialism sickness. I would figure at this point their closets, dressers, storage lockers, 2nd, 3rd homes are just bursting at the seams. How much luxury crap can you buy before you hit the wall, or it just clashes w/ the prevailing clean, minimalist decor? So probably just a decade moment of fashion lag / stasis meeting up with GLUT, once a new luxury motif breaks out they’ll have to rebuild, remodel, refurnish and re-cloth and it should pick right up.
I live in Brooklyn and have pretty much no interaction with the affluenza class. I live in a little studio which takes a little under half of what I take home in a month after withholdings and such. My landlady just raised it by $50, but she and I both know she’s doing me a favor with the price. I pay rent on time and don’t cause problems so they let me slide for considerably lower than they could get in the neighborhood.
Anyhow, if I’ve noticed anything among my peers (a little too old for millennials, but too young for Gen X), it’s that people are straight up giving up and moving out of the city. A lot of people are quitting my company and just moving away, even without other jobs lined up. The obscene rents, costs of living, and shitty pay are finally breaking people. I hang on in quiet desperation. If I lost my apartment I’d either have to find a better job in short order (I try…good lord I try. I’ve applied to about 70 in the past month) or pack it up and go live with my folks in Minneapolis until I could get back on my feet.
Charlotte, NC, about twenty miles north of me, is booming. My town is booming, with record breaking housing starts. I don’t see how the roads and the developers will absorb all this. I remember when only one house in town was worth $100,000. Now the median house price is $400,000. The county was full of litter 30 years ago. Now it is spotless pretty much everywhere.
There have been some major industries moving in. Sometimes they come from Charlotte, which means there won’t be that many new hires, just relocations, though these have a serious economic impact too. In the economically troubled county just south of us, an Indonesian tire plant will employ 1,800 people in new jobs. That’s nearly ten percent of the county’s population. A Chinese company has set up a textile mill, twenty years after the mills shut down in my hometown. We have growing pains, but things could be worse.
Just for curiosities sake, how do the new Chinese textile mills wages offered compare with the wages offered by the last owners of the previous era’s mills? The same goes with the tire plants.
That the industrial capacity previously sent overseas is returning, now owned by foreign concerns, does suggest that a giant ‘Circle Jerk” is going on.
Raleigh, North Carolina seems to be doing quite well, although I’m not sure that we are particularly cursed by affluenza here. Like most places, the effects of income inequality and the “hollowing out” of the middle are easy to observe (provided that one wishes to observe with an honest eye). We are a state capital city, with the attendant legal/lobbying franchises in-tow, plus a major research university (NC State) in the middle of town, so we always seem to have a fairly healthy inventory of 1%-20% incomes to support a Lexus-driving midfluenza class.
Brand new “luxury” apartment complexes have sprung up like mushrooms after the rainy season, with outrageous rents considering the units are basically smallish shoeboxes stacked 5-6 stories into the air. Apparently, “millennials” will fork over silly amounts of their earnings to reside where the action is. My theory is that the value proposition is really a Darwinian dynamic about dating-and-mating that privileges proximity to the appropriate class-level. (I could be wrong, however. It wouldn’t be the first time.)
North Carolina as a whole appears to be two (or three) different states operating under a single name. There are the much wealthier-on-average (and, notably, much more diversified) urban economies along the I-85 corridor, and then everything else. The population ingress here is a powerful force, at least in Raleigh. We’ll be Atlanta in 15-20 years, sad to say.
I work for an industrial supplies distributor, and our sales are slowly dropping month by month. We had a 10% paycut (unheard of!) several months ago. Many talented people have left, and we got half the cut back, probably just to stem further departures.
I live in Seattle.
I have a friend who just put his house on the market. The house has been on the market at a competitive price for over a week. No offers.
So, perhaps we are just now seeing the tip of the iceberg right before the Titanic hit. The ship may be seeing that it will be hitting the ‘berg, but cannot stop its path.
I live in Seattle, which is bristling with cranes, Amazonians , a.k.a. Amholes, and some of the worst traffic in North America. Working people are being pushed to the burbs. As a long-time homeowner, I receive lots of unsolicited offers to buy my house, sometimes with a dollar bill tucked into the envelope as an incentive. The last time this happened was in 2008, just before the housing market crashed. I think the next crash is coming soon.
Contrywide reader response and vibe to this article is very informative. With exception of Fairfield County employment in CT. is lukewarm. In New Haven, CT spending/consumption appears muted, some RE is back to 2004 levels, never saw a Chinese investor within 50 miles of here. Taxes and labor in CT is too expensive to generate any significant investment. Light commercial property is for sale cheap everywhere.
Los Angeles here. Not counting the 1% of the 1% over in BH, Malibu, Palisades, etc (because its business as usual over there) – worried about the East LA housing market. Los Angeles doesn’t have the type of local infrastructure needed to withstand the ensuing pop of the housing bubble. Specifically, in neighborhoods over in east la (Highland Park, Eagle Rock, Glassel Park, Lincoln Heights, etc) where the only new businesses popping up are novelty and catered to the wealthy home buyers (all but priced out of West Hollywood, Silverlake and Echo Park – which go for easily over $1m). So lots of specialty Donut shops and arcade bars, but no real local business infrastructure of value – markets, laundromats, etc – all that has been washed away by the post-mates and uberification of on demand anything. If the uber economy collapses and the housing market, how are these neighborhoods going to sustain value?
I worry for the people buying the 600-750k 2bd homes in those parts. In order to afford that mortgage, taxes and then some, they have to bringing in about $200k for a three person family. That’s a lot in LA and even amongst my friends the math isn’t really adding up…But everyone seems to think that housing prices will just continue to skyrocket and they’ll be fine. :(
Been in Houston for the last 35 years. Remember several booms and busts. Never seen the urban residential construction look anything like it has since the fracking boom! High level apartments everywhere, and even more constantly starting.
My wife works for one of the big oil companies and says all are very nervous. Just went through a set of layoffs that she survived, but the company is already talking about the impending next one, which has her very nervous.
Maybe it’s just my wife’s and I oil company point of view but we can’t figure out who is moving in to all these mega-units. Houston says it has diversified from oil but I’m hearing rumblings about city worker pensions needing a review due to budgeting issues. Lot’s of build-up in the medical center so maybe that’s where they’re from?
For all the concerns though, we just keep rolling along (still just in cars. Houston touts it’s Metro-Rail which takes you from downtown to the Texans stadium. You just have to sit in traffic for the hour or so to get downtown.). Hey, I’m told no worries, it’s always bust and boom in the oil biz!
At least the Petro Metro has diversified itself in the last decade with building up the TMC. I noticed that earlier this year, quite a few energy sector companies went belly up. One of my coworkers recounted to me the days post Enron/dot com bust, when residential real estate hit the fan. It will be interesting to watch what happens during the next engineered global financial demolition and subsequent austerity party.
The galleria/Tanglewood area are hilarious. Saw a “We are the 1%” sticker on the back of a Porsche Panamera.
Only in Houston, Only in Houston. Love this place. :D
Read all the way to the end without anyone mentioning Florida. I live in a rural county in a 35-year-old double wide but I do travel to Orlando and Jacksonville often. Of course Orlando is all theme parks all the time but if you take the toll road around downtown you can see large apartment complexes going up at every cross road and that glass building with the sloped roof on I-4 is finally being finished. Around St. Augusten and up to Jacksonville it’s acres and acres of medical complexes plus Grumman just doubled the workforce at their aircraft assembly complex. Even my little town, the self-proclaimed Bass Capital of the World, is revitalizing its waterfront. The seafood restaurant on my side of the river has its parking lot overflowing starting at 10:00 AM and stays that way until 10:00 PM.
I understand the math of why we have to care about the top 10%’s spending habits, and thus to keep an eye on their neuroses. But wouldn’t it be nice if we didn’t?
Imagine what it would be like to live in a country where the deciles between 10 and 90 also had disposable income, and even the bottom 10% could live decently, if frugally. Pick your method of getting there — progressive taxation, minimum wage hike, guaranteed basic income, genuine universal health care.
Because frankly, the top 10% are not the ones who require our concern. They have sufficient income for all they need, plus some. If they feel strapped because they can’t afford a nanny and private school and a Vail vacation, that is their own delusional idea of what they need and deserve, which we need not humor.
(And no, I don’t want to hear about how living in city x or y is “impossible” without a top tier income, or that $200,000 a year “isn’t that much money.” In those cities there are nurses and doormen and receptionists and childcare workers and janitors and home health workers and bus drivers and cashiers who make a tiny fraction of what the top 10% do, and they either manage to live in the city or commute from outside it, which the 10% could too, if they chose.)
Maybe “affluentsia” sounds better? as in “intelligentsia”?
Affluenza is definitely the disease, not the diseased… :)