Monday, May 02, 2005

Home Sweet Home

Susie echoes Warren Buffett, who echoes me (though he probably doesn't know it) in predicting the coming bursting of the residential housing bubble. I rent, rather than own, in an expensive zip code, and my rent has stayed nearly the same since C and I moved into a two-bedroom apartment, in 2001. (I lived in a 1 BR in the same building from '98 to '01.) The building was originally a hotel, built in 1931. It's quite the quaint old thing, too: lots of interesting Deco veneer in the lobby, parquet floors in the apartments, odd little built-ins, gas stove. They put a new kitchen in the 2 BR before we moved in; the old kitchen was a pit. The minimal changes in the rent have occurred precisely because of the housing boom: nearly everyone who could afford to live in my neighborhood could also afford (or thought they could afford) to buy a condo in the past five years, so vacancy rates were above the miniscule level at which they normally stay around here. Included with the rent is a 24-hour doorperson, basic cable, high-speed internet, and heat; electricity is extra, and runs about $25-$30/month. There's a large laundry room in the basement, along with a workout room; neither of those will win prizes for atmosphere, but they work. There's also a large rooftop deck with one of the best views of the city anywhere. We also have to rent a parking space for C's car, but I take public transportation everywhere (he would, too, except that the trains that stop at the platform in the parking lot of C's company go into the city in the morning and out to the burbs at night, which obviously doesn't work for him).

In the past ten years, I've watched scores of buildings being put up within a two-mile radius of my apartment building. Most are "luxury" condos, mostly high-rises, with some town-home stuff thrown in for variety. These places go for about $250k for a one-bedroom; parking would be extra. I don't know what the assessments would be; I don't have the downstroke to get into these places, especially since we'd need a two-bedroom, minimum, and now we're talking about $350k, more or less. (We saw a place that was in a less-fancy neighborhood but had lots of upgrades that we wouldn't want. It was 2 BR plus a "den" (you can't call it a bedroom unless it has a window), 2 baths, smallish rooms. It sold for over $420k, IIRC, and deeded parking was another $30k. And the nearest grocery store was about a mile away.) Could we move elsewhere and do better, price-wise? Well, yes, but C has to shlep in one direction for work (minimum 45-minute commute) and in another direction to pick up/drop off the kid (in the six years we've been together, mom has transported the kid in one direction or another exactly twice, and the second time was only because C's car's battery died and he needed a jump); that means we have to live someplace that doesn't make his driving even more heinous AND still allows me to use public transportation. If I had to buy a car, for example, or use regional rail rather than city transport, costs go up.

Anyway, I've watched this boom, yes, with a little bit of envy, because it would be nice to own something. I haven't had the downstroke--which, in the past eight to ten years or so, hasn't necessarily been a hindrance, as long as you don't mind paying more interest, etc.--but I've also thought the market has been way, way overpriced. In this city, the housing boom and subsequent overpriced market has been fueled by a number of factors: First, 15 years ago there was a dearth of downtown living space, i.e., a genuine need. (Of course, there was, and is, also a desperate need for affordable housing, especially for really poor and working-class people, but when has that ever been a priority?) Second, for most of the time of the boom, many people didn't intend to live in the places they bought--they expected to use them as rental properties and/or they expected to sell the place without ever occupying it; in both cases they expected to (and often did) make money. Third, I think that a lot of the builders went to different banks or financing arrangements, such that each builder could convince someone that there was a need/desire for the particular building he had in mind; if each builder had gone to the same financers, I suspect there would have been fewer buildings going up. That is, even with the original dearth, I think there's been too much building relative to the market for it.

Within a two-BLOCK radius, for example, in the past five years:
(a) several historically significant row homes were torn down to make way for the butt-ugliest luxury high-rise building ever, which I think is still not entirely full;
(b) an old established business sold their property to make way for another luxury building, but, after tearing down the business, the lot was empty for at least two years, presumably because they weren't pre-selling enough of the units;
(c) on the SAME BLOCK as (b), a historically significant building was torn down (teardown completed last week) for more $1-million-plus-per-unit spaces; and
(d) two large high-rise rental buildings went condo.
I wander around near where I live and I think, "Banks are going to end up holding an awful lot of paper in this neighborhood." I really don't know, of course, because, if I knew about these things, I'd be rich, or, at least, wallowing in the joys of home ownership, but I do know that the market has been way overpriced and that that can't last.

What's also interesting to me, though, is the point that Susie and her commenters make--that many people are focusing on "want" rather than "need." I'd like to think that I (and C) have managed to find a balance between those things, but I'm sure everyone thinks that, don't they? Still, I keep thinking of a story my brother told, of a couple who came into the car dealership to buy a Jeep or something. One was a dentist, one was a lawyer; something like that. Although they had a joint income in the seven figures, they were turned down for a low-interest car loan. Why? Because they had a huge amount of debt, from their multiple properties and vehicles. Even the thought of that makes me anxious. It also makes me realize that Susie and the commenters likely are right.

Eh, I don't know; I'm sure we can all write at length about how we Really Need this or that thing, this or that space, this or that trinket, and I surely do not want to be the Spending Police (except in my own household). But I also think of the posts that Ann writes about these things, and I think about commodification in general, and I think about how our desires get constructed, almost without our participation, and I wonder what's going to happen when this bubble does burst, not just to the foolish people with more cars and houses than sense, but to the people who have tried to carve out a small piece of the pie for themselves and who need the economy to be working for them to get to keep that pie.

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Great post, and there are certainly alot of people questioning the conflation of 'want' and 'need' in our consumerist society. There's a whole "simple living" movement, which I'm sure you're aware of...

"how our desires get constructed, almost without our participation..."

I would say, entirely without our participation, or even conscious knowledge about how our desires are being fashioned for us.

Great post, thanks.

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