My father worked as a baker in a bagel store for 30 years with a bachelor's degree he never needed and was able to buy a home in the suburbs of NY. Yet, 20 years later, that same home is beyond the means of his well educated son who has a salary well over the pay his father was making when he purchased that home (even adjusting for inflation).
It is not unreasonable to expect home prices to rise slightly after inflation, but speculative house prices compounded by low interest rates (which make house prices higher) have driven real estate to levels unaffordable to all except those with wealthy families, the very diligent, and the insanely overpaid (read: wall street big-bonus types and their lawyers). The American dream of making a modest living and owning your own land has all but left the NY metro area.
Adam Smith would be puzzled... The population of the NY metropolitan area in 1980 = 17.5 million , and the population of NY state in 2000 = 19 Million -- it certainly seems that demand has increased a bit, but not drastically so. Unless the urban sprawl effect was substantially offset by the destruction of tenements and affordable urban housing, to the tune of ~1 million homes, this indicates a bubble.
I predict we will see the housing market in NYC and its surroundings plummet in the coming years after laid-off financial workers are forced to find employment elsewhere and sell their Manhattan pied-a-terres, Long Island summer homes, and Northern Jersey tax shelters.
Already the renting market has dropped -- several of my classmates indicate rental apartments in their building went from $1600 last year to $1200. This is just the beginning. Once severance packages, savings, and tenacity of the current residents run out, the floodgates of affordable real estate will open. However, it will take at least until the end of 2009 and beyond for the shake out to finish.
Monday, March 30, 2009
On unions
There is a time and a place for unions. Unfortunately for consumers, the time for most large unions has long passed, yet they remain even more powerful today than they ever were.
Organized labor is most well reknown for extracting concessions from greedy employers. What is less talked about is how today's unions, particularly in the automotive industry, construction, and government sector, have extracted luxurious working arrangements at the expense of the common man. Each concession made to unions is paid for by raising prices and/or taxes.
Eamples of the cost of regulations imposed by unions being passed onto consumers are:
the cost of renting an apartment in NYC ($1,900) costs more than most mortgages in America ($1403)
metro systems across the globe face unjustifiable fare hikes
GM hasn't made a profit since 2005
It's about time somebody spoke up about the dangers of organized labor excesses and where the line exists between a dignified wage and destructive extortion.
Organized labor is most well reknown for extracting concessions from greedy employers. What is less talked about is how today's unions, particularly in the automotive industry, construction, and government sector, have extracted luxurious working arrangements at the expense of the common man. Each concession made to unions is paid for by raising prices and/or taxes.
Eamples of the cost of regulations imposed by unions being passed onto consumers are:
the cost of renting an apartment in NYC ($1,900) costs more than most mortgages in America ($1403)
metro systems across the globe face unjustifiable fare hikes
GM hasn't made a profit since 2005
It's about time somebody spoke up about the dangers of organized labor excesses and where the line exists between a dignified wage and destructive extortion.
Thursday, March 26, 2009
The Fed
The Fed is the most powerful part of Government that is not elected. Federal Reserve Chariman Bernanke is a wicked smart guy who could make a ton more money if he played the financial game rather than serve as the Dungeon Master, hence he's not out to make a quick buck. The problem is Congress.
A bad Congressman has only 2 years to make a quick buck, shmooze with some corrupt businessmen, then land a job in the private sector -- hence they have no real stake in the outcome of government. Good congressmen have a lifetime of reelections to think of, making them just as fickle as a bad legislator in their search for campaign funding.
To top it off, when people elect uneducated, cronyist neanderthals who pander to every partisan pulpit point, we do not have a proper representation of The People's interests. We need more people like the Fed Chairman and less like the scum sitting in on Capitol hill.
A bad Congressman has only 2 years to make a quick buck, shmooze with some corrupt businessmen, then land a job in the private sector -- hence they have no real stake in the outcome of government. Good congressmen have a lifetime of reelections to think of, making them just as fickle as a bad legislator in their search for campaign funding.
To top it off, when people elect uneducated, cronyist neanderthals who pander to every partisan pulpit point, we do not have a proper representation of The People's interests. We need more people like the Fed Chairman and less like the scum sitting in on Capitol hill.
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