Notes from the edge of civilization: Oct. 29, 2023
R.I.P. The American Dream; Zimbabwe's coming to America; Debtor nation; and Yes, don't worry, be happy.
This week, mainstream media told viewers what they already instinctively knew — that if they’re saving to buy a home they’re royally screwed.
An NBC news report notes that “a homebuyer’s dollar goes about half as far as it did at the end of 2020.” NBC goes on to show some shocking charts and statistics to back that up.
From the story:
the average interest rate on a 30-year fixed-rate mortgage is 7.63%
the median sale price of a single-family home is over $416,000 as of Q2 2023
a buyer today needs to make $107,232 a year to afford that median home
but real median household income was just $74,580 in 2022, according to the U.S. Census Bureau
a monthly mortgage payment on a typical, newly sold home is over $2,000, around twice what it was at the end of 2020
While NBC paints a grim picture and tries to offer homebuyers tips on how to get the best deal, they fail to mention the reckless money-printing policies that led to this situation.
Collapse Life took a look at the real-world impacts of inflation and purchasing power in a series of stories this week.
First, as the Prime Minister of Canada blamed greedy grocers for high food prices and threatened to institute price controls, we examined why fixing prices is not a good solution for runaway inflation:
Why price controls are a very bad idea
Even if they are well-intentioned (a big if), price controls are a slippery slope to all-out control.
Then, with the help of a graphic from Visual Capitalist, we explored how the U.S. dollar has lost about 96 percent of its purchasing power since the founding of the Federal Reserve Bank in 1913.
Money. For nothin’.
Today, what you’re seeing and feeling when buying gas, groceries, and housing is all thanks to the remarkably shrinking dollar and its associated dwindling purchasing power.
For some sound advice on how to avoid debt and have a healthy financial outlook, please don’t miss our conversation with the wonderfully avuncular, former Wall Street ‘whiz kid,’ Peter Grandich.
“Get your own house in order,” Peter advises. “If you could pay off and somehow not have debt, not have a mortgage, not have to have $4,000 worth of leases sitting outside… As much as you think that's not gonna bring you joy, not having that financial pressure on you is just an enormous relief that automatically leads to more happiness.”
Speaking of happiness, it seems to be big business these days — or at least the effort to sell the secret to happiness is. Browse the shelves of your local bookstore (if you can find one) and you’ll see thousands of titles. Search online and you’ll find an ocean of magazine articles offering even more suggestions: Friends make you happy! Being single makes you happy! Being a liberal makes you happy!
The more we obsess about how unhappy we are and the myriad ways we’re supposed to get happier, the worse we end up feeling.
New Yorker critic Anthony Lane this week picked apart the Happiness Industrial Complex in a review of Albert Brooks’ new book: Build The Life You Want: The Science and Art of Getting Happier. Acerbically, he responds to the books imperatives:
“Start by working on your toughness.” No sweat. “Take your grand vision of improvement and humble ambition to be part of it in a specific way and execute accordingly.” Check. “Rebel against your shame.” Done. “Widen your conflict-resolution repertoire.” Ka-pow! “Treat your walks, prayer time, and gym sessions as if they were meetings with the president.” Which President? “Journal your experiences and feelings over the course of the day.” Since when did “journal” turn into a transitive verb? “Dig into the extensive and growing technology and literature on mindfulness.” Sorry, I was miles away, what? Above all, “Remember: You are your own CEO.” Holy moly. Do I have to wear a suit to brush my teeth? Is my dog a shareholder? Were last year’s migraines tax-deductible? Can I be fired by me?
The sagacious Peter Grandich doesn’t want to be a part of the ‘don’t worry be happy’ crowd on Wall Street. We’re with him 100%. But if you’re still unsure after watching his interview, perhaps it’s worth revisiting Bobby McFerrin’s witless 1988 hit.
I think that this housing issue is due less directly to monetary issues and more due to other issues.
Existing house sales were driven by people (some institutional, some individuals) wanting higher returns than they could get with the returns of other traditional investments. With interest rates so artificially low, they jumped into real estate as a means to preserve wealth and generate income. Instead of being purchased by what would have normally been first time home buyers, they were bought up by people who were not going to live in them. Some were purchased by people intending to flip them. A huge number were bought by people that were going to rent them out to generate income both as monthly and air-bnb type short term rentals. Instead of getting $2000 a year on each $100000 deposited at 2% interest, you could generate much more in rental income and still have the property itself appreciating. If you didn't want to deal with it on a daily basis, just pay a management company to handle it and you were still way ahead.
Additional pressure was coming from the other direction as well. New house sales were overbuilt to generate higher returns for the builders. Add a few square feet and a few higher end finishes and you can build a $400K house instead of a $200K for a marginally higher cost on the same piece of property. Why on earth would they build a cheaper house?
There has also been a big increase in cost brought about by environmental issues in both the flips and the new construction, they are putting in more efficient and expensive appliances, better insulation, better windows and doors, tighter construction, higher load capacity electrical services to accommodate charging electric cars, and not inconsequentially, higher planning costs for environmental impact studies and the like.
Additionally, in a lot of areas, the whole idea of a young couple buying a fixer-upper and putting in sweat equity is dead. City planning has made it all but impossible to get permits to DIY construction and repair.