Peter Hong on How we cashed in before the housing crash. Los Angeles is one of the most over-priced (relative to wages) housing bubble markets and we appear to be heading towards a crash. All this talk about how this is a great place and people, especially wealthy foreigners, will always want to live here are wishful thinking IMHO.
If people who work here can't afford to live here, what happens? We choke in traffic and pollution, people fall asleep at work or on the freeways, snap at their children whom they barely see awake anyway. Ridiculously high real estate prices fray society.
[For reference, a beginning teacher in our region might make $40,000/year. An engineer might make $60,000/year. The cost of a single family home during the height of the bubble started at $1,000,000+ for 50 year old house with 2 bedrooms and 1 bath. A townhouse the size of ours was $800,000-$1,300,000 depending on condition and location. It was insane.]
Families adjust. They send
It did. How? Well, people are working longer hours but that is only part of the story. The main reason is the flood of financial instruments that allow people borrow more than before. The L.A. Land Blog is a good place to read more horror stories.
The main reason I wanted to point this article out was a paragraph at the end.
When I was a child, my mother moonlighted at department stores in December to earn extra money for Christmas gifts, and I remember parents of many of my friends doing the same. It never occurred to them to put everything on credit cards and worry about the consequences later.
The number of workers in the family used to be elastic. That is, they had workers in reserve. Now, they are stretched to the limit with each parent working 1 or more jobs. Sometimes, they even have young adults living with them and helping to make the mortgage.
Where can they get more income? They take in roommates, with more cars. But that is a whole another rant which I will delay for another day.
Read The Two-Income Trap: Why Middle-Class Parents are Going Broke by Elizabeth Warren and Amelia Warren Tyagi.
In other news, The "it" bag is dead. Designers mourn. Oh, well. In Deluxe: How Luxury Lost Its Luster, Dana Thomas traces the creation of "luxury" handbags. Kathleen wrote a review. I have a few more thoughts to add to her review, but I have to get to work now. I don't get MLK day off.
Hi Grace -- Nice analysis. One clarification, though. My mom wasn't a "worker in reserve" but a full-time single mom with two boys. The other parents I mentioned were also full-time workers taking on another job. But if my memory is correct, these people worked a real 40-hour week, and seem to have always been home by 4:30 or 5. I rarely leave the office before 6, take work home with me, and sometimes work weekends. I think that's true for many of my peers as well.
ReplyDeleteAnyway, didn't mean to quibble, just wanted to add a bit.
Thanks, Peter Hong
Oops. I meant a single mom with a full-time job. Getting a little fuzzy here at work at 6:30 after being here since 8.
ReplyDeletePeter Hong
I didn't mean your mom, Peter, I meant the mythical typical generic family. Actually, I was thinking of the families in 1970s & 1980s in the NorCal community where I grew up.
ReplyDeleteBack in those days, single mothers couldn't buy houses. The banks wouldn't loan money to women, even if they made good incomes. I know two women who found creative ways around that.
One remarried her ex just long enough to qualify for the mortgage. He never lived there. After she secured the mortgage, they quietly divorced again.
A second mother married a coworker. Again, he never lived in the house and they divorced after the mortgage came through.
(My friend made fun of her mother for being so nervous before her third wedding. She said that it was her first REAL wedding. The first was because she was pregnant. The second was to satisfy a bank. The third time was for real.)