The Death of Household Productivity

39 thoughts on “The Death of Household Productivity”

  1. “Little green toupees of lawn”
    I’ve reached for this phrasing for years without finding the deliciously correct words.

  2. I like this blog — esp. reading about what interesting people are doing.

    What I find amusing though is all the folks who predict a Dark Future like they wish for it– a dark future may come, but it may be a different kind entirely than what we are considering.

    These places detailed are not my taste, and likely never will be — though I find as I approach 50 that I care less and less about “cultural amenities” (internet helps) and more and more about the outdoors, so, who knows what I will be like in another 20 years?

    By a similar token — I have been alive long enough to see both mine and others’ predictions not come true — either through History not repeating itself was planned and/or something new and unpredicted.

    One of the biggest influences we seem to be living with right now, and it has a bit to do with the opposition to Trump, is how much foreign money is pouring into the USA right now.

    The source: the fact that the Middle Class of the world has exploded in number, but that these people tend to be more savers than we (or the Japanese) have been trained to be means there is TONS of specie to invest, looking for a home.

    Many world citizens see the USA as a safe place to park that wealth — the fact that we pulled out of the financial crisis before Europe helped, and, as always, political stability and enshrined property rights helps a lot.

    Why does the stock market keep going up? Loose monetary policy? That is likely part of it. But also fund inflows.

    Also, why does Real Estate keep going up in parts of the country? A lot of it is foriegners buying homes here. NYC is crazy — Queens is now in a building boom — it is pushing up real estate prices all up the Hudson Valley as New Yorkers find that Brooklyn is now way beyond unaffordable — they move to formerly dead towns nearby, they buy a farm in the Poconos or the Catskills, etc.

    I know for a fact this is going on in California (and in Vancouver, and in Seattle…) too …. and we are seeing big rises in more inland Western areas.

    So, why not Florida? It has become the Plan B for many middle class people South of the border, not just Cubans.

    I certainly would not have predicted this, even though it seems almost obvious in retrospect.

    1. Shawn – I have no idea what the future will bring. I just look around and see all sorts of really fragile precarious arrangements. I’m not predicting gloom. I’m not longing for disaster. But I think structural imbalances exist in hyper complex systems and will likely wobble and exert themselves in unexpected ways. Some people and places are better situated than others. Floods in Houston, hurricanes in Puerto Rico, fires in California, and sooner or later economic corrections. It’s possible to foresee problems without believing the world is coming to an end.

      1. Hello, Johnny!
        I’m not commenting to the message you left to Shwan, but I just had a couple of questions to ask you. I just recently saw the video that Kirsten Dirksen made of you when you made your home in Hawaii. I really didn’t know how to contact you besides here. Is there any other way I can contact you through a private message? I know I’m just a random stranger, I just would like to ask you a couple of questions about your experience building in Hawaii.

        Thank you
        German M.

  3. I libertarian is a liberal who has been mugged by a co-op board or homeowners association.

    The generation in these places is the richest in U.S. history. They have left their descendants worse off, in the labor market and in public policy. And yet those descendants have been conned into a lifestyle that is more expensive than older generations themselves had as the same age, on lower incomes. The difference has been covered by a lack of retirement savings, and debt.

    So what will happen when the disadvantaged generations reach old age, with their governments having been bankrupted by the generations preceding?

    1. I libertarian is a liberal who has been mugged by a co-op board or homeowners association.

      Isn’t that the other way around? I can’t think of much that would make you want government power more than dealing with an overbearing HOA.

      1. In DC, where I live, newer developments are governed by HOAs. The District has surrendered power to the developers permanently. I live in a 90-year-old house, subject to government rules only. The streets are public, not private property. I can plant any old shrub I want to without getting someone’s permission.

  4. If you read magazines aimed at women from the mid-19th century like Scribner’s or Godey’s Ladies’ Book, you’ll notice that they have articles promoting arts and crafts projects. Interestingly, they are sometimes prefaced with a note that the projects were chosen for being useless. The idea was that the middle class woman who could afford to read a magazine should farm out actual productive work to a less fortunate woman who could use the money. So, the magazine reader might make a doll or a sampler or perhaps a table throw, but was expected to hire a seamstress to make clothing and linens for the her family. Making her own dress would be taking work and money from someone else less fortunate.

    This got amplified in the 20th century when women became the consuming sex well men remained the producing sex. The whole idea of the post-war American suburb was as a place for consumers, not producers. Sun City just took this model an extra mile or so.

  5. You’re talking a pretty severe disruption to put them out of sorts. Even the 2008 meltdown wouldn’t have tossed the old guy with his savings in conservative investments out on the street or needing to stock up on the proverbial canned goods and ammo so that he could creep out of this development and poach chickens or goats.

    Still, I’m old enough and fit the demographic for these sorts of developments, but they’ve never appealed to me. Florida humidity is hard to take if you didn’t grow up with it.

      1. Yeah, but what changed in Nebraska or Detroit was that their local economic base withered away. In NB you can make an argument that more efficient agriculture lessened the need for workers and hence the businesses that relied upon them. As for Detroit, we still make a lot of cars in the US (or at least, assemble the parts made elsewhere into a vehicle). That industry moved away from Detroit for other reasons. I’ve spent a bit of time in the NE working on projects in some of the second tier cities that can seem to be on the other side of the Berlin Wall from NY or Boston. What industry these towns had has packed up and moved south or abroad. I disdain Trump, but I think that many of those who supported him are raging against policies that encouraged their employers to move away. We see some of that in California – there is a lot of poverty in the Central Valley.

        The folks in the Florida developments will probably be fine. They are affluent enough to support what they need around them in terms of entertainment, food, medical care, etc. Trying to stick it out in Maine whether you are old or young will continue to get tougher and tougher.

        Hope your house in Sonoma Co is ok. I have property there too, and the fires have come too close.

        1. “The folks in the Florida developments will probably be fine. They are affluent enough to support what they need around them in terms of entertainment, food, medical care, etc.”

          With the next generation poorer, however, when they’re gone their children won’t be able to sell those places for much, and they won’t be allowed to move in either.

          At the time when a lot of Brooklyn was heading for the zombie “apocalypse,” the neighborhood where I lived was redlined. Unless you knew someone at a local bank, you couldn’t get a mortgage to buy here. What prevented the neighborhood from sliding downhill is much of the housing was passed down to people’s children, who could stay in the neighborhood (unlike today, when the kids can’t afford to). Or people would give their houses to the church, who would then give it to a parishioner for whatever they could afford.

          I can’t see Florida going that way. They need another generation of seniors who are just as well off to move there, and the share of senior who are that well off is going down. Among the better off in younger generations, moreover, there are fewer broken homes, and thus more people who might want to live near their kids.

        2. I disdain Trump, but I think that many of those who supported him are raging against policies that encouraged their employers to move away. We see some of that in California – there is a lot of poverty in the Central Valley.

          I have occasion to drive I-5 down the Central Valley once or twice a year, from Santa Nella to Los Angeles. For the past several years, the “freeway through hyperspace” has been lined with large signs on truck beds parked just outside the right-of way:
          and the like.

          When I was driving that route in January 2017, there was one major change: Over half the signs had an addition:
          MAKE AMERICA
          GREAT AGAIN
          (And the 2016 election map when itemized by county showed well over 90% correlation with major urban areas blue (Hillary) and everything outside these cities red (Trump). It wa urban vs rural.)

          On my last trip down the 5 last January (2018), these secondary signs had been replaced with:
          GREAT AGAIN!

  6. Strictly speaking about retired cohort, I think you’re overstating your case here. My dad’s house is paid off (in a regular neighborhood sans HOA) and he’s getting both Social Security as well as drawing down his IRA, which is basically a series of boring CD/Bond ladders at this point. Now, I understand the financial system and/or the federal government could collapse, and that many people aren’t prudent like my dad, but the idea that a retired person’s home needs to be “productive” is a bit far fetched. So I’m not too worried about the boomers. Now, as for Gen Xers and Millennials… the short end of the stick is coming sooner or later and it’s sharp.

    1. First, I made no reference to “collapse.” You projected that on to what I wrote all by yourself.

      What I stated is that these kinds of living arrangements are vulnerable to disruptions. That’s not the same as “collapse.” The whole world doesn’t have to fail for your household or subdivision to become compromised.

      But you made a valid point regarding intergenerational wealth transfers. Part of the vulnerabilities built in to the existing financial system involves shifting consumption forward towards Boomers at the expense of younger generations. Eventually this will express itself in unexpected and destructive ways.

      1. To quote you, Johnny, “these kinds of living arrangements are vulnerable to disruptions.” Indeed. And I think when they are shiny new and in demand, it is terribly difficult for most people to perceive this, never mind articulate it.

  7. That Mexico City apartment complex reminds me of Lefrak City in Queens, NY in the 1960s. It had everything: swimming pools, tennis courts, play areas, a supermarket, stores, doctors’ offices and so on. The supermarket, most stores and offices were open to the public, but the rest of the place had security checkpoints, though not with armed guards.

  8. Thank you for this insightful post. Here in Mexico City where the demographics are little different, we are seeing similar suburban developments as this one you describe, but aimed at well-off young families. Some look substantially similar to this one you portray. Others, especially out in Santa Fe, where much of Mexico City’s financial industry is now clustered, are complexes of high-rise condominiums with marble-floored foyers and glorious views, mega-security all around, and inside are beautifully manicured laws, tennis courts, playgrounds, party rooms, swimming pools… The mothers do not have to drive the kids around to playdates, nor does the family need to keep a driver on salary as they might have in a stand-alone house. The biggest attraction, so I hear, is that the kids can just ride down in the elevator, wander outside, play with their friends (under the supervsion of nannies, in the case of the little ones) and ride their bikes wherever they please, all around this ginormous and super-safe complex. Everything and everyone who ventures outside their apartment is on video camera 24/7. All the moms and kids and nannies are on Whatsapp and FB. Within the complex, Mom has yoga and pilates classes, Dad can go jogging… or vice versa, or whatever. There are restaurants and hair salons, too… but these many amenities are not open to the public. No one can get in or out of the complex with passing through more than one check-point; visitors must surrender their ID card when they enter.

    But back to your post. What’s very interesting to me is that these developments seem to have much in common with the senior community you describe.

    Also, for high-rise condominiums, there is the added vulnerability of possible bottlenecks with governance issues when large expenditures need to be financed, e.g., one day having to replace the heating and air conditioning system or, say, updating the elevators. For such large structures, any such expenditures can be huge– millions of dollars. At present the money is there– people are buying up these condos, and, so I hear, prices are steadily going up. But even when the money is there, for any major assessment, trying to get everyone to agree to pay, and to agree on how to finance it, and agree on what precisely to spend it… not as easy task.

    We live in interesting times.

    1. C. M. Mayo says: “The biggest attraction, so I hear, is that the kids can just ride down in the elevator, wander outside, play with their friends (under the supervision of nannies, in the case of the little ones) and ride their bikes wherever they please…”

      The irony of it all. What used to be a freely available and standard American childhood experience (1960s – minus the elevator and the nannies) has now been packaged into a high-priced commodity.

  9. Having lived in South Africa, and having spent a lot of time in the townships (Apartheid’s view of housing for blacks was “out of sight, out of mind), the idea of suburban poverty is far from an alien one.

    They get along, but then again, they were never told that they were rich.

  10. I guess what’s weirdest is that nobody puts a gun to people’s heads and makes them buy in these subdivisions. Am I missing something? Builders only build to make a profit. If nobody buys what they’re selling…
    It makes me scream when people are so willing to pay a premium for a brand-new house that’s “done”, whatever that means.

  11. About 20 years ago, my husband and I started looking for our first home and considered an affordable subdivision of new homes surrounding a small park with a pond. We were surprised to learn the subdivision covenant forbade outdoor clotheslines and more than two pets. Because we are both animal lovers and dryer haters, we ended up buying elsewhere.

    My experience has been that humans, for reasons I don’t understand, continually find ways to sort ourselves into ever more “elite” groups. I bet neighbor conflict still exists in such heavily regulated communities, just grinding the differences ever finer. Is someone keeping their sidewalk clean enough? Why doesn’t he replace his roof? And so on.

    Our neighbors are a bunch of young men who work in the oil field and drive big trucks. Sometimes they park in the yard or too close to my driveway, which I don’t like. They probably don’t like that I feed the neighborhood’s stray cats. But they are quick to wave hello, don’t mind I have a sprawling pumpkin patch in the side yard, mow part of my yard when they mow theirs, and immediately let me know the time my dog jumped the fence. It all evens out.

    1. Well, in a sense it can be an investment. My house in midtown will be paid off in another 8 years or so (before I am ready to retire). If nothing else, I can sell it to fund my retirement somewhere. So it may work as an investment under that scenario.

    2. True enough if you evaluate it against other investment classes.

      But let’s do some conceptual math. Where else can I put down 5% in cash to lock in my rental rate for 10 or 15 or 30 years at a known number, while all other costs rise 2-4% a year (or, in my adult lifetime stretching back to the late 70s, more for some of those years)? Realistic additional costs would include the periodic repainting (a couple times over 30 years depending on climate), roof repair/replacement (once, after about 25 years), several water heaters and an HVAC system. But remember tax savings gained through deducting mortgage interest and local property taxes from income (which should be enough to fund those periodic expenses).

      So if you think of the “yield” on the investment as being a locked-in rental rate with limited and discrete repair/replacement costs, there is still considerable value in owning because of the avoided rent increases…even if there’s only a little residual value at the end of the ownership term.

      This really only works well if you’re going to stay put for the majority of your mortgage term, and (as we learned in 2007-10) it doesn’t work with floating-rate notes that can change the monthly payment during a time of economic stress on your income.

      1. You won’t get any argument from me against the current accounting system as you described.

        My point instead:

        1) More and more people are falling out of the middle class and can no longer participate in these financial arrangements because they lack the jobs and income.

        2) The complex systems of financial markets are already in the process of failing on the macro level so even the folks who can participate are vulnerable to disruption.

        1. 3) Younger generations – who would be the next round of buyers ready to pony up when the current “investor” is ready to cash out – are saddled with high levels of student loan debt. In effect they already have a mortgage for their degree. Fewer of them will be able to buy a house. Fewer buyers => lower market.

          1. Yes. And that’s assuming that younger people will want to live in such places as they achieve financial lift off. The young family that provided the Florida photos has no interest in such a location.

            1. The “good investment” feature of a house is really that it does cost less over 15 or 20 or 30 years to buy IF, as Johnny points out, one can qualify for the mortgage.

              At some price point, even debt-laden Millennials will be able to buy a particular house, which gets to the points of Hawkins and Goldstein above: no it’s not a good investment for capital gain, for no capital gain is guaranteed.

              But my main point is this: it is JUST an investment in level or reduced housing cost, and my retirement plan relies only on having a paid-off house to live in. If I can’t sell the one I live in, fine…I’ll live there until they carry me out. I am not counting on residual value but am counting on low-ish cost in a home where once it’s paid off, the only expense is RE tax and maintenance.

              So really it’s more of a “forced savings” vehicle that provides a measure of resilience and protection against homelessness once my income stops. And if things break down to the point Johnny suggests, the HOA isn’t going to stop me from growing vegetables or having chickens on our suburban 1/3 acre. I probably woudn’t go as far as hogs. 🙂

              1. Might I remind you that, thanks to the amazing heist known as “public schooling,” aka government schooling, you will never own your house. You will always owe taxes on it, and if you fail to pay those taxes, the government (which isn’t you, the people, oddly, in these circumstances) will use force to remove you from said investment. We are pretty much unique in the world that way. I have lived in other countries where the property tax was a fraction, a tiny fraction, of what we are assessed annually in the USA, and it was not unusual for the property owner to say, I can’t pay this year, only to be told, No problem, pay next year.
                I remember that uncomfortable fact every time my town wants to issue another bond to pay for something, and the townspeople say how excellent that is, completely forgetting that it is their own property that is backing that loan.

                1. Not to mention that less and less of those taxes will be going to the schools, parks, streets, libraries, or anything else that provides value. They will be going to the debts and deferred costs of those who retired to Sun City.


                  And the only way to avoid that mortgage at 50 percent of your income (on average) is to not buy a house unless and until it is so cheap that it hurts the seller to sell it.

                  But the government is pushing you the other way. When the current occupants bought, Fannie and Freddie had a total debt limit of 30 percent of income and a mortgage debt limit of 25 percent of income for a conforming loan. This limited what housing could cost relative to income. But now that underwriting criteria is 45 percent, so millennials could pay more despite being paid less, and give the older sellers and their mortgage holders everything they have promised themselves. This is one reason the price of houses has jumped back up. And no one talks about it.


                  “For manually underwritten loans, Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix. For loan casefiles underwritten through DU, the maximum allowable DTI ratio is 50%.”

                  I wonder what the credit score will be after a few years of living with a mortgage that is 45 percent of your income. Plus taxes. Plus the 25 percent you’d better put away, because Medicare and Social Security will be cut for you. Good luck! Can we have another tax cut now?

    3. Why? That statement is proven wrong millions of times

      Now, in a direct “compounding gains” way, sure.

      Maybe you mean a heavily leveraged home. That gets more complicated.

  12. Spot on, Johnny. I often wonder if the Sun City model will die off with the older generation. I’m 56, and probably won’t see it in my lifetime, but I can’t help thinking that the will go the way of shopping malls.

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