This summer I am in Alaska once more, working for my father’s landscaping business (it pays rather well, even taking into account the high airfare from Texas to here). Of course, this means I work long hours six days a week and am rather tired (hence my lack of bloggernacle participation over the last month).
I would love nothing more than to move back to Alaska after I graduate. I likely wouldn’t be able to get a prestigious academic job, but I don’t really care for prestige all that much.
However, this is likely impossible for me. Why? Rich people have driven the land values up so high that at the median income for the area, I couldn’t afford to live here. Here’s the relevant article. Here are a few quotes from it:
The tide began to shift in the late ’90s, according to real estate sales statistics of Homer and the surrounding area, including Anchor Point. The average sales price of a Homer-area home crept upward from $119,000 in 1999 to $132,000 in 2002. In 2003, that number jumped nearly 8.5 percent, and by last year, it had soared to $190,000.
In some areas of Homer, the leap was even more dramatic. What cost $136,000 in 2002 was suddenly worth $215,500 in 2005.
and here:
While home prices have risen dramatically, wages have not. The average household income in the Kenai Peninsula Borough in 1999, according the U.S. Census, was between $40,000 and $50,000. At that level, the $215,000 average sale price in Homer is far from reach.
Based on the recommended mortgage-to-income ratio, a family in Homer with two working members earning $12 per hour could afford a $134,400 home. To get into the $200,000 home with a healthy debt ratio, that family would have to earn between $85,000 and $108,000 per year to support mortgages that can climb upward of $5,000 per month. A retiree who just sold a home in California may be able to afford those prices, but the average Homer resident still can not.
Defenders of capitalism (which I am sometimes – to paraphrase Churchill, it’s the worst economic system in the world except for all the others) often claim that when the rich move into an area and build houses, it still increases the economy because they hire people to build the houses, thus creating jobs. In this case it doesn’t work – instead it drives families out because they can no longer afford to pay the property taxes and the like – and the construction workers don’t make enough to afford houses on increasingly expensive land.
A similar thing has occurred in my wife’s hometown of Sierra Vista, Arizona. It borders a military base – but because of rich retirees moving in and increasing the property values, most military families can no longer afford to live in Sierra Vista. All one must do to see the evidence of this is to take a short drive in the main neighborhoods and see that, more than 1/3 of the houses are for sale. A clear indication that old residents are on the way out.
Any supporters of the rich want to defend this practice of oppressing the poor and middle class, or is this another example of what the Book of Mormon often warns against?
[UPDATE: Small change in the title – I decided the original word was too strong and not what I meant to convey].
Boo frickety. Try Orange County California some time.
And I’m not entirely clear on just what the rich did that was wrong here. They bought houses?
That’s nice gst – mockery always leads to responsible discussion.
They drove the property values so high that those with average incomes can no longer afford to live in the area.
You expect Orange County to be pricey – but the salaries of the residents tend to match that.
Not so much in Alaska where the lack of infrastructure and manufacturing makes the cost of living rather high to begin with. Property values used to be manageable. But a jump in average price from 136,000 to 215,00 in two years – well, gst may think it’s just whining, but that makes it impossible for someone like me who grew up here to live here. I might be able to live in some of the border communities, but those come with their own problems (such as lack of sewage, long commutes that eat up gas and time, lack of accessibility to resources the rest of the lower 48 states take for granted).
One of the big complaints in Alaska is that the youth who leave the state for college never come back. Now there’s just one more reason why we won’t (or can’t) come back.
You sound like Yogi Berra–nobody goes to the ballgames any more because they’re too crowded.
The median home price in Orange County is about $600,000. The median family income is, I believe, still under $100,000. So unless the median family income in Homer, Alaska is lower than about $35,000, I win this sucky game.
gst –
?????
Why the bile? I am open to being convinced I am wrong, but all you seem to want to do is play some odd game I was unaware we were playing.
Anyway, I’m guessing people in Orange county have ready access to health care, supermarkets and infrastructure like paved roads (or just roads in general) and sewers. Not necessarily true in Alaska. I’m also guessing stuff (i.e food and material goods) is generally cheaper – whereas here in Alaska, it costs a lot more just to exist (one small example – items you could get for sale as 10 for 10 bucks in Texas are 8 (or 6) for 10 bucks when on sale up here. That’s a 20 to 40 percent increase in prices right there).
Also in Homer and the surrounding area, we don’t really have apartment buildings or places for those who can’t afford to buy houses to live.
But I’m not an economist – I’m hoping someone with an economics background (maybe Frank) can explain in detail what’s really going on and why it’s not so bad (or worse than I think).
The two things to keep in mind about Alaska: 1. Lack of infrastructure and 2. Much higher cost of living (even on the low end of the scale).
Because you offended me as a rich person. I’m now going to instruct Punjab to buy out the entire eight o’clock show so you can’t even go to the movies.
I lived in Orange County, paying $400 a month for one bedroom in a house occupied by a man, his daughter, another tennant, about three hundred spiders, a few thousand ants, at least seven roaches, and, whenever the man wasn’t around, his ex-wife, who barged in and screamed about how much she hated him and was glad they’d gotten a divorce. I made $8.23/hour after working at my job for 19 months; if I’d been promoted to a team leader status (a possibility if I hadn’t given up and moved back to my mom’s house in Ohio) I’d have gotten a whopping $3 pay increase. The cheapest apartments were in the $650/month range; I got offers to move into a house with 11 other people and pay $235/month for the privilege. Oh, and nearly every job I could find was either temping-based (at $9-11 an hour) or part-time; I took the $8.23/hour because it meant I had the same employer for those 19 months. There were three hour lines at the reduced price clinic, which charged $45 for a consultation based on my income — and I wasn’t eligible to qualify for low-income housing without a roommate (and the waiting list was 5 years long.) About the only thing that was cheap was my 10 year old car, which I bought from a friend (and the registration cost nearly as much as the car itself, and no I can’t figure out how that works.) I left CA a few months after the car died because it would have cost more than I paid for it originally to fix it. Just because The OC makes things look great doesn’t mean they are; there’s plenty of real poverty in Orange County. Drive into the neighborhoods a quarter of a mile from Disneyland and you’ll find it — or go a few hundred yards inland from those insanely expensive beachfront properties.
For the most part this kind of thing happens in places where people are choosing to move in without regard to the local economy — they’re retirees or vacationers, and they’re willing to pay premiums because they’ve built up equity somewhere else. It’s a tough call, though; over time the premiums they’re willing to pay will help subsidize improvements in local infrastructure. As long as you don’t become Vail or something you’re probably better off on the margins. And it’s better than being in a dying industrial town in the mid-Atlantic region of the US. Have you seen what it’s like in rural Pennsylvania and West Virginia lately? Almost every kid I know from places like that comes away swearing never to go back; many hope to “rescue” their parents by retirement age, installing them in a newer suburb outside of Vegas or Orlando or something.
(in any case, from what I understand living in Alaska has always been more expensive, and risky, than living elsewhere… it’s never been a nice place to be poor or a safe place to be on the lower end of the middle class spectrum.)
Sarah –
thank you. That helps me understand it a bit more. Your last sentence is truer than most realize.
The biggest problem is the sudden increase in just two years – and it has been because (as you mentioned) a flood of retirees who only spend the summer here. This doesn’t really help the local economy much, since during the winter, spring and fall they don’t add anything to the economy (not being here), while the property they’re paying a lot for causes all the year round residents to have to pay higher taxes, mortgages, etc.
gst –
after reading Approaching Zion by Nibley, I long ago stopped caring if I offend the rich or not. I also never hit the 8 pm show, so if you want revenge, he would need to buy out the 10 am half price weekday matinee.
Isn’t it getting like this everywhere? The home I bought in Davis County eighteen months ago now costs $60,000 more to build in the same area.
Ivan, I’m not quite following. Is there a shortage of land in Alaska on which to build homes? I don’t quite see how even a large influx of rich retirees would change the price of lots. Is it just that they are buying up all the building materials? Could you explain this? I can understand how in places like say New York City, Los Angeles, or even Salt Lake limited area increases prices. Supply versus demand. It’s harder to understand that in Alaska.
Secondly if there isn’t low cost housing isn’t this primarily a zoning issue? Especially if there is land round about.
Thirdly, doesn’t the increased property taxes lead to better infrastructure which does benefit everyone? Especially if the people paying the taxes rarely use the infrastructure? That would seem to lead to an overall benefit.
It sounds like your real concern is the taxes. But isn’t that an issue that one ought be able to vote on? Something presumably the summer home owners would be unlikely to do. Overall it sounds like a problem with how taxes are done. i.e. how the county accessor calculates the value of lots. But that is tied very much to zoning. (i.e. places that explicitly zone low income housing areas)
So might I suggest that the issue isn’t the rich but rather your county government?
BTW – average home cost in Provo is $205,640. The average nonagricultural pay was $29,700.
I blame the two-income families for driving the costs of everything up. If you really don’t want to have to be a two-income family, you’re out of luck. Since most every other family (or so it seems) is now a two-income family, they can afford more stuff than you can, and those who sell the stuff to them quickly figure out just what it is the market will now bear.
Three cheers for the laws of supply and demand.
Ivan,
It sounds like the real estate boom is finally hitting Alaska after having skyrocketed everywhere else in the country. If anything, Alaska seems to have lagged behind everywhere else. My advise: buy now. It is only going to get worse if you don’t own (or better, once you own)!
The way that markets work is that if no one can actually afford to pay for homes, new homes get built outside of town or prices start to drop in a correction of the market.
Also, I fail to see how the “average family” is getting pushed out. It sounds like every average family just made $100K in 5 years.
The average home price in Lincoln, MA is $989,000. The average income is $89000. That is more than 10X different.
This is happening everywhere. Check for the same information on your neighborhood in Texas and you’ll likely find it to be the same.
“To get into the $200,000 home with a healthy debt ratio, that family would have to earn between $85,000 and $108,000 per year to support mortgages that can climb upward of $5,000 per month.”
And this is just plain silly. I don’t know how a $200,000 mortgage equals a $5,000 payment. The MOST it could be is maybe $1,500/mo. which is only $18,000/yr. That means on a $45,000 salary you can allocate 40% of your income to the house. It’s totally doable. And TrailerTrash is right, buy now. The rule in real estate is that the best time to buy is five years ago. It has always been that way and always will be that way. I can’t tell you how often everyone here in Brooklyn says “If only I bought that place five years ago for $400,000 it’s worth $1.2 now!!!” and they’re right. Just so you know, 90% of millionaires made their money (mostly on paper) in real estate. And it’s not only because property values have gone up but because they get other people to finance it (banks) and other people to pay off that financing (tenants). By renting you’re adding to the (apparent) problem.
The first and only house we’ve ever bought we got for $85K in the mid-to-late-90’s, in a small retirement town in rural Washington state. When my husband got laid off from his job at the only decent employer in town (a snowboard factory), we had to sell it. I don’t remember what we got for it, but I remember that if our agent hadn’t cut her commission for us, we would’ve had to *pay* $500 when the deal went through.
That house is now worth about two times what we paid for it, or more.
And it was a crappy house.
I’ve heard that a lot of buyers here in Cali are taking out loans that are interest-only for the first 5-6 years, and once their loans change to full payments, there’s going to be a lot of houses on the market, and that should drive home prices down.
Meanwhile I’m wondering how much interest-only payments are, cuz I’m so tired of being in an apt. Renting a house is ridiculous here (I’m in Orange County)–the cheapest 3 bedroom I’ve seen in our ward boundaries is $2500/month.
Are they running out of land in Alaska or something? It doesn’t sound like rich people are the cause of the price increase in Alaska. If you are really curious, follow the costs of building and find out where the jump is. I wouldn’t be surprised if building permits, impact fees, cost of following building code, materials, labor cost being high because of taxes, and property tax aren’t big factors. The only way rich people would drive the price up is if the supply of homes or buildable land is way less than the demand. But even if so, then the better approach may be to get into real estate and sell to these rich folks so you get the profit and they pay mightily to live there.
Ivan,
Churchill said (and I’m paraphrasing too):
“Democracy is the worst political system in the world, except for all the others.”
Not Capitalism. Democracy.
I know that the GOP wishes they were the same thing, but they aren’t.
Ivan,
While I agree that housing prices are getting out of hand, I also think that some Americans need to be reexamining the advisability of pursuing “the American Dream” as they envision it.
The harsh truth is that some people are too poor to even think of buying a home. Ever!
Yet through predatory lending, a widespread sense of entitlement, and unrealistic expectations, every American expects to be able to buy a home.
The predatory lending is coming to a head here in Colorado (where it’s largely unregulated). Housing developers will offer mortgage loans to poor suckers with as low as $200 down payment (and even no down payment at all). That’s plain irresponsible of both the lender and the buyer. The mortgage is, of course, sold to another financial entity. One neighborhood in the Denver region with about 120 homes has seen around 50 foreclosures in the last 3 years. People are buying what they can’t pay for, and real estate developers are encouraging them in the belief that they can.
One of the most recent little gems to hit the real estate market is the “50 year mortgage.”
50 years! That’s unbelievable!
But everyone is so convinced that they’ll just live in the house for three years and then sell the mortgage to someone else at a profit in a hot housing market. Never mind the fact that the interest rates and payment scheme on these loans makes a profit from this kind of investing highly unlikely.
The problem is also that we are simply running out of space … or at least desirable space. It used to be that there was room for all, and every American could expect a home of their own.
That paradigm is already dead. The future of America is a future where a large portion of us will never have a home and should not expect to ever have one. The dream of a home with a lawn and a nice kitchen is as much of a myth today as the American Cowboy.
But people are taught to expect everything for themselves and their families. But you just aren’t entitled to home ownership anymore. The sooner we figure that out, the better.
My father and my mission president both grew up in Montana, went off to college, and didn’t come back. So nothing entirely new there.
The local variation on this here (in Delaware) seems to be that the youth most involved (overall, not necessarily the Eagle Scouts) are the ones most likely to go to BYU for college, and those who do go there are the least likely to come back. (I somehow did, albeit kicking and screaming.) Most of those I grew up with, that are still here, are not especially active now.
Seth: The kicker with the 50-year mortgage is that it’s a fixed rate for only the first ten years. Not that I’d advocate either, but if I had to choose a 50-year or an interest-only, I’d go with the latter. My wife and I just bought a house and got a 30-year mortgage. We’ve set it up so we make half a payment every two weeks, in hopes of getting it paid off faster.
Ivan,
Your dilemma is very simple to understand. It is basic economics:
1)Average family income is increasing over time, although it may not be happening to you or others on this board.
2)The average-sized house is increasing, meaning houses are getting more expensive to build. 50 years ago a 1500 sq ft house was huge — now it is a starter house. This is a nationwide phenomenon.
3)The American dream is owning a house by the time you are 27. This was not always the case. Again, 50 years ago, people didn’t necessarily have the expectation that they would own a house. Many, many people hoped they would but settled for renting their entire lives. Now, you’re a loser if you don’t have a house with the three-car garage, four bedrooms, etc, etc.
4)More land is being set aside for public parks/open space/zoning restrictions, etc than at any other time in our history. I happen to think this is a good thing because I like parks and open space. But the reality is that if you have land where housing can’t be built, the supply of land will go down. And if demand remains stable or increases, then costs go up. Basic economics.
5)Retirees (the rich you refer to) have more income than ever in history. This means that they can move to places like Alaska and pay for houses and drive the housing value up. But they are not necessarily rich — they are middle-class people enjoying the American dream. I personally think it is a charade because with our current demographics there is no way that we will be as rich when we retire as the retirees now.
But look on the bright side: by the time we retire, we won’t have the money current retirees have and housing prices may come down!!!!
My brother married an Anchorage girl and they returned (or rather, she returned, with my brother in tow). Her whole family moved back. In fact, it sounds like a LOT of people choose to move back, what with the government SUBSIDIZING your residency.
My brother was able to buy an affordable house in Anchorage. To be sure, it was a little more pricy than in other areas of the country (I live in TGSOT), but it was a great house and they are a single-income family (he works for the State of Alaska).
The valuation phenonena you describe are simply normal, every day market forces. Don’t blame the rich. Blame the “American” “dream” of “homeownership”.
queuno, who can’t wait to sell everything he has and buy a tiny condo…
I think a lot of the comments from people who are questioning Ivan’s perceptions are overlooking something extremely important about housing. A house or land is not intrinsically worth anything. It isn’t like consumer goods, where there is cost of production and then a profit markup. Instead, it gains its value solely from comparison. The whole business of appraisal, which drives the whole business of lending, property tax, insurance, etc., is based on what other “comparable” homes have sold for. Therefore, if you have a lot of people moving in for whom money isn’t an issue and who are willing to overpay, then that does drive the cost up of everything else. Until you put in regulation on real estate appraisal and valuation, this problem is only going to get bigger.
And please don’t try to claim that it’s an issue of supply and demand and that the market will set the price. People don’t think rationally when buying a house, because they’re so afraid of being priced out of the market, and so the prices become articificially astronomical. As a few have pointed out, predatory lending is only compounding the problem, giving people the purchase power to drive the price up even higher when they don’t have the means to support it.
And remember, he’s talking about Alaska, not Washington D.C. In DC, for example, people can keep moving further and further away to get lower prices, as long as they’re willing to accept a longer commute. Many people now live in Frederick, MD, nearly 60 miles away, and commute to DC every day. But in Alaska, this isn’t a possibility, because as Ivan pointed out the infrastructures aren’t there.
Blame the fed! 4-5% interest rates, combined with lack of faith in the stock market, fueled more of the real estate boom then any retiree exodus from the coasts!
Whoa! Lots here.
Let’s see:
Seth –
I know Churchill said it about Democracy, but I feel it applies to capitalism just as well. ALso, the picture you paint in #19 is rather bleak. I hope it’s not that bad.
Clark –
there’s not a shortage of land in Alaska, but a shortage of land that has access to actual infrastructure. What’s happening is rich retirees, in order to make sure they get a good house in Homer, will willingly pay as much as the sellers ask, and this winds up driving the costs of all the available land in Homer.
Rusty –
that makes sense. I’m not much for figures, so I wasn’t sure how the income/house cost figures actually matched up.
Trailer Trash in #13 –
I am in no position to buy a house now. I still have to get through my PhD program in Texas.
queuno in #22 –
re: Alaska subsidizing residency
800 bucks a year after two years residency doesn’t really make up for the huge differences in cost of living. Plus, the market in Anchorage is actually fairly decent.
N.G. –
exactly. See my response to Clark above.
Ivan,
I’m a bankruptcy attorney.
From where I’m sitting, yes, it is that bad.
More children in the United States will experience a bankruptcy in their household than a divorce. Crippling mortgage and education loans, combined with a general lack of financial responsibility (or education), skyrocketing health care costs, and predatory (or at least irresponsible) lending mix for a very bad cocktail.
…retirees will willingly pay as much as the sellers ask, and this winds up driving the costs of all the available land in Homer.
Why focus your wrath on the buyers who are willing to contribute their accumulated wealth to the local land owners and not on the greedy and price-inflating sellers? Two sides of the same coin. (BTW, IMO, neither merit condemnation here, I’m just curious about the apparent discrepancy.)
Like others, I suspect that the solution to the problem (if, indeed, the residents actually view it as a problem — I bet many of them don’t) lies with the zoning boards. I’ve not known a lot of developers to be adverse to platting and building new areas when prices run up and land is available.
From my uninformed-by-any-visit-to-Alaska perspective, I suspect that that Alaska has some vacant lands. Developers are accustomed to building infrastructure to places they plat and develop, so I don’t think the “outside the scope of existing infrastructure” situation is one that is more than a temporary blip in the process.
I bought my house for $30,000. It’s now worth 6 times that much. I think it’s that way all over. I don’t think my husband makes 6 times as much.
Worse in St. George, Vegas, and California.
If I were rich, though, I’d have a million dollar cabin in Homer and in Idaho, and Seattle, and a loft overlooking Central Park.
“there’s not a shortage of land in Alaska, but a shortage of land that has access to actual infrastructure. “
What counts as infrastructure? Electricity? After all septic tanks and wells work pretty good for plumbing. If the problem is infrastructure then once again the problem isn’t rich retirees it is the State government and country governments who aren’t getting the infrastructure put into place.
In any case it seems silly to fault people for buying houses. That’s life.
I was wondering what TGSOT stood for, and finally figured it out: “Thank God, Someplace Other than Texas.”
I agree with Jay’s point in #24 – low interest rates are a huge factor in driving the real estate boom. People can afford high prices because interest rates are low, although even that is reaching the end of its cycle as evidenced by the 50-year mortgages. When interest rates go back up, a lot of people are going to find out they’ve got a mortgage that’s a lot bigger than what they can sell their house for.
Then I guess people will stay put. We’ve got families moving out of our neighborhood because they’ve outgrown their 4 bedrm, 2 bathrm home now that they’ve got two kids. Raise interest rates, and I bet those families will suddenly realize they’re really not as cramped as they think they are.
Sorry, annegb. There are no lofts overlooking Central Park. But there are some pretty nice apartments that would set you back a huge bundle of cash.
I think Seth’s prediction of the demise of homeownership is too dire by half (or more). My two married children own homes, and have for three years and one year, respectively. One works as a manager in the construction business in Las Vegas, the other is married to a medical resident in Pittsburgh. Neither is making megabucks, although I’m expecting big bucks to support the in-laws from the future radiologist. The bank obviously expected the same when it loaned the money to buy the house.
The keys: buy small, buy something that you can fix up, be frugal.
I agree with Seth about the banks, though. They’re irresponsible at best, and predatory at worst. If people default on their loans/credit cards/whatever, let the banks eat the loss!
Couple follow up points:
1. The price of a house is mostly due to perceived value, but not completely. It does cost materials and labor to build. If the price of a home were all perceived value then you would either have no existing homes sell (because the cost to build new would be less than the percieved value of the existing home), or you would not have any new homes built (because the cost to build would be greater than the perceived value of the existing home).
2. Definitely interest rates and easy credit have inflated home prices. People usually buy on what they can afford per month, not what they can afford to spend in their lifetimes. When interest rates go down, the total cost of buying a home goes down, principal + interest + taxes + insurance + maintenance=cost of buying. For first time buyers, or buyers with little equity, the interest amount makes up most of the mortgage payment. So since people spend less on the mortgage when interest rates are down, they can afford more house or a more expensive house. This cause prices to increase. Similar things would happen if all of the sudden more people could borrow 200K at 6% or whatever (easier credit). There would be a surplus of buyers which would increase housing pricing.
There is a real danger that those who have purchsed a home who are using it for their primary residence and who have little equity and who have interest-only or adjustable-rate mortgage could be upside down in their homes if interest rates were to go up and credit go easier. I saw statistics on how many home owners are in this situation and it is really high. Not only would their payments increase for those with ARM’s, but prices could come down to a point below what they owe. How owuld you like to have $300K left to pay on the house and have it be worth $250K? Ouch. You’d have to fork over $50K just for the privledge to move. But most people who get these kinds of mortgages are not the ones who have $50K saved up, otherwise they wouldn’t have gotten those kinds of mortgages.
There could be some real bargains in the near future if the housing markets drops. Maybe it’s not such a bad idea to wait for those mansions to be put into foreclosure.
Recently this ad for a house caught my attention. One look at the picture and another at the price tells the whole story.
No Mark,
I didn’t predict universal home ownership would cease.
I said that the dream needs to die, or be altered, for the health of society. The expectation of universal home ownership is hurting our society in many ways. I do not think it is ultimately sustainable.
But I predict it will continue as it does today. Until our universal societal sense of entitlement and greedy opportunism ruins everything. Yes, it’s pessimistic, but too many vested interests are founded on the paradigm of American housing for any significant needed changes to be likely.
By the way, credit card providers and banks almost never “eat the loss” when someone defaults (not the big ones anyway). When an account defaults, they sell it to affiliated collection agencies and let them try to squeeze more money out of “the deadbeat.” The rest of any financial loss to Citibank is farmed-out in insurance.
Actually, Visa-Mastercard-etc. like customers who make late payments and default on loans. Late fees, hiked interest rates, service charges … this is where the real money is at for big lenders. In fact, Banks make an obscene profit from service charges and late fees. It’s a BIG part of their profit margin.
Big lenders like to sign-on irresponsible borrowers. It brings the cash-flow. When they actually get a responsible borrower, who pays every month, they actually try to trick him into missing a payment to jack up his interest rates. I’m not making this up. I’ve seen it happen.
Big lenders like to spout off about how much “deadbeat borrowers” are costing our economy (usually when they go to Congress demanding more favoritism). But it’s just rhetoric. They aren’t losing anything from these saps. The risk was all farmed out long ago. If anything, they’re making a killing from it.
Clark –
you need to live in Alaska for a few years. You need infrastructure to put up more infrastructure. Infrastructure is goind up, at a fairly slow rate – but when you only have on main highway running through the state, and most towns/villages/cities inaccesible by roads, it doesn’t make for a quick process.
I don’t fault people for buying houses. And I do put some blame on the real estate agents who jack up the prices merely because they can. Often these are 3rd or 4th houses lived in only a few months out of the year – yet they make it so that long time residents can no longer afford to live here, since the high property values (pay attention – they went from 136,000 to 215,000 in two years) last year round.
So what we have is buyers to whom price is no object and sellers who keep selling at ever higher prices. This drives up property values, and thus property taxes. Suddenly the families that lived here can no longer afford to live here, and young families can no longer afford to move in. Even out of Alaska, like I mentioned, in my wife’s hometown, the military families who work on the base can no longer afford to live anywhere near the base because of similar problems. Tell me this isn’t anti-family on some level.
yeah, that’s life. But that doesn’t mean I have to like it.
Mark B.
I think your own experience is somewhat tilted. While I agree that Seth’s prediction is overstated, it is bad out there. For example, your married child in Vegas, had they recently moved in, may not be able to afford a house today. I interviewed for a job in vegas in the fall/winter of 2003. I visited again in February 2004. Prices were rising, but you could still get a 2000 sf house on a 6000 sf lot for 200k in a decent area (instead of $170k a year before). Fastforward 6 months, the same house is going for $325k.
One of the problems in Vegas is lack of existing housing stock. But they are a different city anyway.
They have a fiduciary duty to do this. What would you think if your real estate agent who you hired to sell your house told you, “Sure, I could have got another $50,000 out of your house for you, but I decided against it because I didn’t want to contribute to the inflation of the housing market.” You’d fire him. He should also lose his license.
I just realized I had focused so much on the “real estate market” story. Ooops.
The question is, what should our position be as followers of Jesus Christ as to our housing. We all need housing, except of course if you live in a balmy tropical setting. Is it ethical for us to have a large house? Fine settings? What duty, if any, do we have towards those less fortunate, including the homeless?
Is it ethical to have large suburban lots? Remember, even in BY’s day, he provided for small lots (relatively). Something to ponder.
IT seems to me this is one of those modern day versions of fine twined linen.
I’ll give one more example – we put in the lawn for a guy who bought a house in a nearby area. He put up a pimped out house – spa, jacuzzi, fancy furnishings, etc. guess what? At the most, he uses it three weeks out of the year – some years he doesn’t come up at all. Yet his house raised the property values in the area so much, other residents were driven out.
That, to me, is opression of the poor. For selfish reasons, someone decided they wanted a fifth house in Alaska for use a week or so a year. By doing so, he has made it near impossible for poor and middle class people to live in the area.
gst in #38 has just said we have a duty to make sure we charge as much as possible – i.e. make sure the middle and lower classes can never afford a place to live. Fine twined linen – or perhaps great and spacious buildings.
Clark – it’s not just people buying houses – it’s people buying houses in such a way as to make it very, very hard for those of lesser means to afford housing at all.
As for the insanely high housing market in Provo, I’ll let Orson Scott Card’s comments on the houses in the hill in Utah County in A Storyteller in Zion say it for me.
I don’t think “the market will bear this” means something is moral. In fact many things the market will bear are very immoral.
Ivan,
I also hate to break it to you, but a $215K home is by no stretch of the imagination a “rich” home. You should retitle your post to something like: “One more reason to hate the lower-to-middle class retirees”.
TT –
see comment 40.
For the area, it’s rich. As a 3rd or 4th home, it’s rich.
But then again, I only have the rest of Alaska to compare it to, since I don’t really pay attention to the housing markets in other areas, not being interested in them.
But I think it’s fair to say if you own 2 or more homes, you are much richer than the general population.
I think JS in #39 has hit the heart of what I’m really trying to get at.
I, however, seem to lack to skill to figure out what I’m really getting at. That’s what makes the discussion nice. It allows me to work it out.
Ivan (40)(43),
Yep, that’s really what it comes down to, as painful as it is for those who “work so hard”…so much harder that they earned/deserve what they got, just like those who got not.
Where I live, real estate has risen an average of 8-10% per year over the past 5 years county-wide. My local community has seen even greater increases (my family has never been able to afford a home here) and the great challenge we face now is that the entire service sector, government sector (incuding teachers and admin)…the entire middle and lower class has been priced out of the market, so that these people who provide vital services for our community cannot even live in the community unless they rent…and even that requires a dual-middle-class income to support a family.
Why is this? Probably a very complicated answer; but I’m a fan of the simple answer so here goes: it’s because people who get paid significantly more money for their services than is justified by anything but pure and marginally bridled capitalist competition, compete with each other to live (or vacation) in the most desirable places. And the side-effect of pricing “lesser” people out of the market is in fact part of the appeal of such competition.
Ivan, one factor not yet raised is the Bureau of Land Management. I’m from Nevada where 87% of the land is property of the federal government. Las Vegas is ringed by federal land on every side, and it literally takes an act of Congress to get any of it turned over to private or state use. Alaska is something like 99% federal land.
When the price boom came to Las Vegas, it looked to me like the speculators in California couldn’t find anything worth buying closer to home anymore. That they’ve arrived in Alaska shows how far afield they have to go now.
John –
there is a lot of that -I’m sure these issues are much more complex than any of us (especially me) realize.
There is a lot of complaint by Alaskans about the “Californiazation” of Alaska.
No, Ivan, I did not say that we have a duty to sell for as much as possible. You, quite obviously, are free to sell your home for as little as you like, or give it away, without any moral qualms. What I said was the real estate agents representing sellers have a duty to maximize the selling price. I said this in response to your baffling comment that you blame real estate agents for asking for “more” merely because the market will bear it. Of course they do. That’s why people hire them–we believe that they have specialized knowledge on what the market will bear, and knowledge of how to take advantage of it. You are, of course, free to hire a listing agent and instruct him to give your house away for nothing. But expecting an agent to do something other than refer to market conditions when pricing a home is asinine.
gst –
sorry I misunderstood you, but I seem to have hit a nerve.
But I will repeat this:
Just because the market will bear something does not mean it is okay or even moral behavior. Often, the market will bear very immoral behavior. I’m sure the market bears fine-twined linen and great and spacious building very well. But we all know what the BoM has to say about that.
I agree that recent trends in housing prices in some areas are troubling.
Harvard Econmist Ed Glaeser believes a large factor is local land use regulations. Here’s the abstract from one of his papers:
ed –
fascianting article. Working my way through it now, though I’m going to have to call up an economist friend to understand some of it.
Of course they will–who would suggest otherwise? Markets reflect the desires of the participants and are themselves morally neutral. They cannot, for instance, distinguish between your righteous desire to return to the land of your fathers and my oppressive and evil desire to own my third vacation home. It only knows that you and I want to buy the same house and can only distinguish between us by our ability and willingness to pay. Perhaps you have a more moral way of distributing houses–by all means, share it.
Ivan, I’m sticking with the “it’s the zoning” as the cause of the problems. City government decides where infrastructure is built and what kind of homes can be built on what land. To blame the folks buying homes rather that the government that decides what kind of homes can be built where is simply unfair.
I can feel for the lack of affordable housing. But simultaneously I don’t think folks have the right to live where ever they want, regardless of cost. I might wish to have a house in downtown San Francisco for instance. But I don’t think I have the right to.
Now in terms of effective planning it sounds like your government is simply brain dead. However when that happens, especially in local government, it is primarily the fault of the voters. Government does what the people want. Or rather what the people who vote want. Not having affordable housing so that low wage workers can supply necessary services is always a short term gain in tax base but a long term cost. And this is very well known. The problem has been replayed all over the place.
It’s unfortunate that sometimes we can’t find the kind of jobs we’d like to live where we want. But I honestly don’t see it as a sin to live someplace where perhaps it is harder for others to live. Not when it is so easy to move in the United States. The fact of modern life is moving where the jobs are.
Clark,
Just another case of the breakdown in our society of all natural human social bonds and connection with the land we live on.
Speaking of Approaching Zion, here’s something Nibley writes there:
Unless Nibley is being sloppy with language, using “especially” as if it were somehow a synonym for “but only”, this assertion seems to imply, among other things, that worrying about whether the rich are getting more than they deserve is degrading. (Yet, elsewhere in Approaching Zion Nibley seems to do an awful lot of the latter sort of worrying.)
I grew up in a household where the running jokes were about how much my mother overdiluted the orange juice and Campbell’s soup and how many sandwiches she could make out of single package of sliced meat, and upon retirement in the late 90s (when Nibley’s own home had a market value twice as much) my parents sold our family home for the whopping sum of $55K, but for whatever reason I was never taught to despise the rich, and reading Approaching Zion didn’t make up for this deficiency in my upbringing.
What counts as infrastructure? Electricity?
When I was in Alaska, that and a paved road pretty much were it. We had sewers and electricity, but Artic Blvd wasn’t paved.
BTW, you’ve got to try a septic system after two months at 20 below. They don’t quite work the same.
On the other hand, a little bit more time in Texas on that PhD and you are going to want to stay here.
The longer I’ve been in Dallas (Plano), the more I’ve liked it.
Chris –
I don’t despise the rich, if that’s what you’re getting at. And it’s not just concern over my particular welfare: I see life long residents of my home town being driven out – and many people from my generation, when we do get together often discuss how much we would like to return to Homer, but can’t.
Though Clark is right – there aren’t a lot of new jobs being created, so the only real housing growth is among retirees, and the city council has rather odd zoning laws here.
Ethesis –
been in Texas 3 years (not counting summers now) and, while I haven’t been to Dallas, I can say that honestly, the longer I stay, the more I want to leave. Sorry.
I’ll probably wind up getting a job in North Dakota or something. We’ll see.
This has been a very enlightening discussion.
Yeah,
Pretty much people who aren’t committed to their own neighborhoods snorting at the people who are committted to theirs. Tough beans indeed.
Ivan:
Call it what you want, despising or hating or disliking the rich has never been a temptation to me, and maybe that’s why I have so much trouble understanding Nibley’s anger.
My parents’ hometown, to which they returned upon retiring, is seeing something similar happen to what you say is happening in Homer. It’s arguably the first naturally green spot one encounters when one leaves Southern California and drives north on I-15. Consequently, the population of the valley has grown by a factor of 10 in the last 20 years, with many of the new move-ins being relatively wealthy, Californian, and/or retirees. Property values have climbed, so its harder for the younger generation to afford home ownership there, but do they really have more right to it than the poor souls who’ve had to live their whole lives outside this paradise?
The idea of old-timers being forced out by property taxes is hard for me to understand, but perhaps my situation of having my property taxes account for a negligible fraction of my income is unusual. On the other hand, as I look at the online public records for Homer, I see, for example, a 2000 sq ft home on a 2/3 acre lot assessed at $150,000, a property tax rate of 1.285%, and various substantial exemptions, that would put the annual bill well below $2000. Don’t Alaskan families spend more than that on (non-moose) milk? š Seriously, are people really leaving over that amount of money (in a state without income tax)?
I read John McPhee’s book on Alaska and have wanted to see it ever since.
Chris –
Honestly, I have no real idea. I see things happening, but then again my experience is anecdotal rather than comprehensive.
I just asked an economist friend what was going on, and he said it was “immoral speculation” as though that was a standard economic term, but then he said he wasn’t sure of enough of the local details to make a true diagnosis.
There’s no state income tax, but there are lots of local and borough (county to you lower 48ers) taxes, plus the state has other non-tax taxes that take the place of an income tax. But, I’m not an economist so I can’t be sure what the impact of any of that is. I just go by what people tell me most of the time, especially since no one’s really done a comprehenisive study of the area.
gst –
#52 makes a lot of sense (*except that part about my righteous desires – I sometimes wonder if I’m not being selfish by wanting to live in Alaska. But then, my Arizonian wife insists I get a job in Alaska so I have to obey her).
probably the worst thing that could happen would be to have the government step in and put a cap on housing prices. That way lies madness.
Some people who say they can’t afford to buy really mean they aren’t willing to live in the places they can afford. So you might not be able to buy a two car garage, 1500 sq. ft. house? How about a condo? How about a very small old house?
When we bought our first house in the Seattle area, I decided the only way I could afford to stay home and buy a house is if I pretended I lived in 1960. So that meant we never ate out, we didn’t have a cell phone, we had only one car, etc. In 1960 people didn’t expect master bathrooms, large bedrooms, garages, AC, computers, etc. (Of course I couldn’t exactly talk my husband into the no computer thing).
Maybe it was easier because homeownership and SAHMhood was something we were saving for before my husband finally graduated from college. We weren’t perfect but I made years of financial decisions based on my goal of owning a home and having the option to stay at home.
I plan to raise my children to realize that every purchase they make at age 20 can affect what they can acheive financially at age 30, age 50, etc. Maybe some of them will get it, maybe some will learn the hard way.
JKS –
no worries for me there. I hope for maybe a small house with three small bedrooms, a kitchen and a small living area. I don’t need guest bedrooms, computer rooms, home offices or any of that (maybe a basement to store all my books). I don’t have a cell phone, and don’t plan on getting one anytime soon. I think I much prefer not being available to call at all hours.
I likely worry too much. And the title of this post seems increasingly inaccurate to me.
Who is rich?
Anyone with more money than I have.
It doesn’t matter how much you have, you will always think that “the rich” are “those other people.”
Seth –
too true. I know a guy with 4 houses, several sports cars and a million dollar a year plus salary. He still refers to himself as “upper middle class.”
It is very relative. Compared to him, I’m poor. Compared to most of the third world, I live like a king.
“I don’t despise the rich, if that’s what you’re getting at. And it’s not just concern over my particular welfare: I see life long residents of my home town being driven out – and many people from my generation, when we do get together often discuss how much we would like to return to Homer, but can’t.”
how is this different from what’s happened in hundreds upon hundreds of small towns across America where a lack of jobs and shifts in the economy have kept people from being able to live in the area? My parents current ward is probably almost entirely over 40 with a significant portion over 60 simply because everyone moves away. There’s little work beyond farming and getting services and workers down is difficult.
I guess I just don’t see, contra Seth in #54, that people ought be able to have some massive connection to “the local land” which means it is some ethical right or imparitive that they be able to live there. Sorry, I just don’t. It’s a national economy and fast becoming a global economy.
For instance if I wanted to live in Alaska I probably couldn’t just because of the issue of work. Is that fair?
Clark,
We have lost a great deal. The most telling sign of all, is that we now have an entire generation that doesn’t even know what it is that we have lost.
Essentially, it is a loss of human gratitude, humility, and appreciation. It shows itself in many ways. But if you can’t see it yourself, it will be very difficult for me to explain it adequately.
Seth, I understand what you are saying, but I tend to personally feel that closed communities with little “flow” tend to have bigger negatives than positives.
I’d probably also disagree to a certain extent over gratitude and humility. But I’ll not get into that discussion.
JKS makes a good point. Maybe we could afford a house if we moved to Compton. (Which I actually would not mind doing if I didn’t have teenagers to worry about.)
Clark wrote:
“I’d probably also disagree to a certain extent over gratitude and humility. But I’ll not get into that discussion.“
Well, I will. What does gratitude and humility have to do with whether I ought to get first dibs over outsiders when it comes to settling down in the community where I grew up?
re: 64 Probably the truest comment on this thread.
Question: Why do humans always tend to compare themselves with those who have more? Ivan’s comment in #65 illustrates this nicely. Most likely his affluent friend really believes that he’s ‘upper middle class’ because he’s comparing himself to friends who don’t work a regular job, don’t fly commercial, have live-in help, etc. I do the same thing. Even though my standard of living is very high, I often feel kinda broke because I live near the mega-wealthy and count some of them as friends. Why don’t I compare myself to the woman who travels 90 minutes on a bus to clean my home for $70, or the guy who towels off my car at the carwash, or even my support staff at work?
Here’s why: If I acknowledged the extent of my materialism, I would be filled with guilt and might well need to change my lifestyle. Since I enjoy the comfort and don’t want to change, I live in quasi-denial and compare myself to the people above me on the ladder.
I’d venture that by global standards, virtually everyone commenting in here is quite wealthy.
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