The Restless Project

Why the toxic combination of economic unease and always-on technology is driving Americans crazy.

Click to learn about The Restless Project

We need drugs to sleep at night.  Nearly half of us don’t have enough in a bank account to cover next month’s expenses, let alone any real head start towards retirement. We buy homes with mortgage payments our parents couldn’t fathom, or we make student loan payments almost that large. We are digitally tethered to work by gadgets that constantly let us down with bad directions or dead batteries. We almost never take vacations, but when we do, we read email every day anyway. We chug Starbucks and Red Bull to try to keep up, but we feel like we are letting everyone down all the time anyway.

America, land of the Restless.

 

But why?

I have a simple question I ask when I try persuade people that there’s something very wrong with the way we live in America today.

“Can you think of any friends with children who are secure they will be able to pay for their kids’ college?”

There’s always an uncomfortable chuckle, as if I’d just asked if they knew someone who could weave straw into gold. Then there’s usually a discussion about how everyone feels like they are working harder, and perhaps even making more money than they’d ever dreamed, but yet falling behind anyway. So they run on the rat-wheel faster and faster.

Restless.

Today I am announcing a new long-term effort, an on-going series, called The Restless Project.  I plan to unpack the root causes of this Restlessness. I believe they are paradoxically both more subtle and more obvious that most busy people realize. And I think it’s such an important discussion — I think it is the story of our time — that I am interrupting my career to shine a spotlight on it.  Along the way, together, I hope we can explore ways to jump off the Crazy Train.

Trina Foster-Draper. No one should have to undertake a Fourth Act.

Trina Foster-Draper. No one should have to undertake a Fourth Act.

I will talk about humble Americans like Trina Foster-Draper, a 56-year-old single mom of four who will be proudly writing her last check for her kids’ college this year.  She was recently laid off by CenturyLink in Logan, Utah, where she’d worked in customer service for nearly six years.  What will she do now? Go back to school for information technology and begin her fourth career transition.

“Everybody has to keep changing, keep reinventing themselves now,” she said to me, sitting in her apartment she shares with her father – a brand new building adjacent to a massive Walmart. “There’s no choice.”

Despite the occasional catcalls from folks who casually argue that today’s adults are just lazy and selfish, for the most part, there’s general agreement on the problem — the creeping sense that life is somehow spinning out of control.  It is.  Today, we all live under pressure from a diabolical combination of economic dis-ease and technology disruption that keep all of us, not just on our toes, but on the edge of a cliff.  Second Acts are fine, even romantic. Fourth Acts? That’s insanity.

The reasons for Restlessness that I will explore in this series are myriad:

1) It’s an economics story. Just 50 years ago, an American household with one decent job could afford a decent home.  That math is now horribly broken. Today, it takes two incomes, and even at that, a much higher percentage of household income to buy a home. That’s why you never feel like you have enough money.

2) It’s a work-life balance story.  Since you are insecure about having enough (what if one spouse loses a job?) you work too hard. Fear is an excellent, horrible motivator. People don’t take proper nights and weekends any longer, instead putting in hours over remote corporate networks, in large part because they feel like they have to. Forty hour work weeks took hundreds of years to evolve, which is an interesting history I will share soon. Smartphones took them away in five years.

3) It’s a technology story. Smartphones haven’t just wrecked our ability to disconnect from the office.  Pick your favorite restaurant: How many people are staring at phones while half-talking to each other?  Step back from the scene for a moment. We all look like rude idiots doing that, always more interested in people somewhere else than the ones we are with.  Sure, you could be better about phone etiquette. But billions of dollars have been spent figuring out how to make you addicted to these things. You didn’t stand much of a chance.

4) It’s a broken social contract story.  America’s social contract, always part-myth and part reality, has broken down entirely, in a way that doesn’t make sense. Today, people with regular jobs in regular cities can’t afford regular homes there.  That should be impossible. After all, the price of most homes should settle roughly into what most people can pay for them.  But not when the value of those homes is propped up impossibly by a credit system built like a pyramid scheme.  The math, you see, is against you.

5) It’s a disappearing middle class story. A quick thought experiment: What is a solid middle class job that would let someone comfortably own a modest home? Teacher? Cab driver? Bike mechanic?  Today, workers are driven towards high-income, lottery ticket-like professions such as information technology. Of course, a decent home in an IT-friendly neighborhood near Silicon Valley costs $1.2 million. Better work hard and get that big bonus. Meanwhile, not everyone can write computer code or be a physical therapist. What are the rest of American workers supposed to do?  This isn’t a minimum wage story. This is an average wage story.  By every measure, the economic “recovery” after the Great Recession has done nearly nothing to help the middle class. Sure, unemployment is shrinking, but that’s a misleading stat. Here’s the truth: Low-wage jobs represent nearly half of all jobs created as part of the recovery.

6) It’s a marketing story. What do you do when you feel scared of the future?  Well, you drink Red Bull, for one, so you can work all night and impress the boss. And maybe work yourself to death. Or maybe you pay $250 for a new pair of shoes, just so you can put aside for a moment those hopeless feelings that you’ll never, ever, pay off that student loan. Or maybe you’ll hand over your finances to that lovely man in the white shirt who tells you he can help you pay for your kids’ college, even though all he’ll do is suck out a percentage of your money in fees every year. But he does make you feel better.  The cycle of Fear and Consumption, as we all learned in the movie Bowling for Columbine, is powerful.

7) It’s a where-to-live story.  NYC dwellers have always been restless, always with one eye looking out for an emerging neighborhood where it might be possible to afford a dreamy 3-bedroom apartment in relative safety.  All of America lives like this now.  As I travel the country, everyone with a second or third kid on the way is trying to make impossible math work – where are the wages higher and the housing costs lower? North Dakota? North Carolina? Florida’s west coast? Oregon? So-called “second tier” cities are gaining steam and migrants as the recession’s recovery drags on, but these moves bring on other problems – like proximity to meth houses.

8) It’s a hacker story. Sure, computer criminals who might empty your bank account in ways that you didn’t even know possible is enough to keep you up at night. But that’s barely the beginning of the story.  Behaviorists have hacked you and now desperately try to deliver just the right ad at just the right moment so you can’t resist buying your product.  Huge firms with names you’ve never heard of collect data on you by the hard-drive-full – Axciom admits having 3,000 data points on nearly every American.  Heck, folks are hacking your genetic code.  What are your right to all this incredibly important, personal information? Basically, you have none.

We’re restless, and I want to explain why.  I’m certainly not alone.  Brigid Schulte, a Washington Post reporter, recently explored the complex life of American woman in her excellent book “Overwhelmed: Work, Love and Play When No One Has the Time. You’ll recognize some of the concepts about the relationships between two income homes and housing costs from Elizabeth Warren’s classic, The Two-Income Trap.

Since I’ve spent 20 years writing about ripoffs and the dark side technology, I think I have a unique perspective on the problem of restlessness. For the past year, since I left my job at NBC, I’ve been chipping away at stories in this area. Here’s a few examples:

 

I plan on covering the hell out of this topic.  (There’s already 27 stories in my special “Restless Project” section, which you can find here.) And don’t worry, I promise to write about hopeful trends, too, such as the explosive growth in yoga, or the technology tools that really do make our lives easier, or what folks in other countries do to stay sane in our digital world, or the members of the “Resistance” who are fighting for worker rights or simply promising to turn off the cell phones for the weekend. I hope you’ll follow along, you’ll criticize me, and you’ll make suggestions to help bring this story the attention it needs. The best way to make sure you don’t miss a post is to sign up for my email newsletter by clicking over to this form, or just fill out the box on the upper-right hand corner of this page.

The journey is personal. As I look around at my own career, I see the insanity of journalists trying to do an honest job and raise families in world where everyone is judged – not just by Neilson ratings – but by Facebook likes and ReTweets.  That’s a popularity contest which no one can win.  And I see my friends, who are increasingly incapable of having fun without having their faces in a phone or a video game, and I fear the lonely future that seems stretched out before me. I love a good chat.  I hope you will, too.

Sign up for Bob Sullivan’s free email newsletter here. 

 

 

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On the left, 1996 expenses for a family of four. On the right, 2014. Pew infographic. Click for report.

On the left, 1996 expenses for a family of four. On the right, 2014. Pew infographic. Click for report.

Here’s all you need to know about the fragile state of the American middle class. An online payday-type lender named Elevate Credit sees the middle class as its target market.

“Decades–long macroeconomic trends and the recent financial crisis have resulted in a growing ‘New Middle Class’ with little to no savings, urgent credit needs and limited options,” the firm says on its website.

The new middle class. Lining up to borrow money at triple-digit interest rates.

You probably think of payday lenders as unsavory places where Americans without checking accounts must go to cash a check, or where folks without credit cards rob Peter to pay Paul so they can pay the electric bill.  Well, if Elevate is to be believed, triple-digit rate loans aren’t just for the poor anymore.

As part of my Restless Project, I argue often with anyone who will listen that the American economy is seriously broken — and the middle class has a lot more in common with the poor than the rich.  Folks who don’t realize this aren’t paying attention, and they’re destined to be surprised when they find themselves shopping for payday loans someday.

How did this happen?  Easy. Monthly expenditures are up for families, while incomes are flat. More money is going out, while more money isn’t coming in.  Each time costs edge up while income doesn’t, people are closer to the “don’t even have one month’s of emergency savings” category.

The new middle class is the restless class. They might live in a nice-enough house, and even have some nice clothes. But they are one illness or one layoff away from a very uncertain future.

The Pew Charitable Trusts recently broke down the “more money is going out” data is a report blandly titled “Household Expenditures and Income: Balancing family finances in today’s economy.” There’s nothing bland about its content. From 1996-2014, a typical American family spent about 25 percent more on housing, food and other basics.    During the 1996-2014 time frame, the biggest expenditure jumps came in housing, which grew from $12,300 annually to $17,000 annually, and health, which jumped from $1,119 to $2,560.

But incomes didn’t keep pace with rising costs.  As a result, “slack” — or money left over at the end of the month — is disappearing from the family budget.  On average, Americans spent 71 percent of income on the basics in 1996, and in 2014, it was 75 percent, and headed the wrong way.

The recession really exacerbated the problem.

“From 2004 to 2008, median household income grew by only 1.5 percent, while median expenditures increased by about 11 percent,” Pew said. “By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained.”

Do your own math.  The typical household – using “median ” data — saw its spending grow from $29,400 in 1996 to $36,800 in 2014, or roughly $3,000 a month.  Using “average” numbers, spending grew from from $43,200 to $54,800 during that span, or about $4,500 a month.

How does your family compare?  Recently, I asked readers to share their monthly budgets with me — asking how some families live on less than $60,000 annually — and these figures are in line with what I heard from you.  Here’s a typical budget from Texan Matt DeMargel

Rent: $1,350
Healthcare: $588
Utilities: $400
Child care: $600
Food: $800
Car insurance and gas: $300
TOTAL: $4,038

(Note, the DeMargel family was lucky enough to pay nothing for child tuition or student loans.)

Even that modest budget requires a roughly $60,000 salary, before taxes. Remember, these are real expenditures, so they must be paid with after-tax, actually-hit-your-checking-account dollars.

Of course, people at the lowest economic rungs struggled the most.  Households in the lower third spend 40 percent of their income on housing, while renters in that third spent nearly half of their income on housing, as of 2014.  That’s a flat-out terrifying way to live — renting, and giving half your paycheck to a landlord.

But it’s important to note that struggles and anxiety are continuing to reach deeper into that “new” middle class.

Back in 2004, the typical household in the lower third had a little less than $1,500 left over every year after accounting for annual outlays – so-called “slack” in the budget. Just 10 years later, slack for this group had fallen to negative $2,300, a $3,800 decline. These households may have had to use savings, get help from family and friends, or use credit to meet regular annual household expenditures.  Those without credit cards turned to products like payday loans.

Slack has all but disappeared from the “middle third” folks as well, however.  The typical household in the middle third saw its slack drop from $17,000 in 2004 to $6,000 in 2014.  In other words, the “leftover” line on the monthly budget fell from about $1,500 to $500 for America who are solidly middle class, approaching upper middle class. That’s $500 to deal with every emergency car repair, unexpected health issue, or Heaven forbid, a vacation.

No, living without slack is nothing like standing on bread lines. But it is frightening enough to keep you up at night. And it should help you realize that the “new” middle class, the restless class, has a lot more in common with the poor than the rich in America.

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BLS -- Click for data.

Jobs at restaurants ad bars are plentiful.  Source: BLS.gov — Click for data.

Here’s all you need to know about the U.S. economy: It’s a great time to be a waiter or bartender.  Or a nurse. Everybody else….meh.

You’ve seen the numbers. The U.S. economy keeps churning out new jobs by the hundreds of thousands, month after month. Even long-term unemployment numbers seem to be perking up. So why do things still *feel* so bad?  And more to the point, why are presidential candidates  able to capitalize on that feeling so easily?

I set out to find out, and found myself in a love/hate relationship with Labor Department data recently.  We’re still dating, the data and I. “It’s complicated.”  But here’s what’s not complicated:

Since March 2011 — five years ago — the U.S. economy has added 12.4 million jobs.  Here’s a sampling of where those jobs have appeared:

  • 2.2 million in ‘leisure and hospitality,’ including 1.8 million in ‘accomodation and food services.’
  • 2.6 million in ‘education and health services,’ including 2.1 million in ‘health care and social assistance.’
  • 1.4 million in ‘retail trade’ including 300,000 in car dealers and 260,000 in ‘food and beverage stores.’
  • 1.3 million in ‘administrative and waste services’ for professional and business services

And there you have about two-thirds of all those job gains.

Mind you, there are plenty of good paying restaurant jobs (though median wage data is as bad as you’d imagine). There are certainly plenty of good health care jobs.  And there are folks who do well working at car dealerships, too.  But this is not the sign of a modern economy awakening from a slumber.  It’s more like an economy snoring during a nap.

Let’s take a step back.  I started down this road because of a great column about last month’s job gains from ZeroHedge.com.  It explained rather brutally that Americans who are losing manufacturing jobs have had no trouble picking up jobs as wait staff in bars and restaurants.  And that’s the problem.  The fastest-growing job categories in from that “positive” March jobs report were food and drinking establishments, retail trade, education and health, and construction.  Those four categories made up about 8 out of every 10 new jobs created last month. Meanwhile, manufacturing lost 29,000 jobs. Almost exactly as many jobs as food service created.

Here’s an even bigger step back. You’ve probably heard that America is now a service economy. Here’s what that means. The U.S. has 143 million nonfarm workers — with 102 million of them working “private service.”  Manufacturing and construction make up 19 million, and government 22 million.

For a very rough mental picture: put 10 American workers in a room, and roughly 7 of them would be service workers, while 3 would be making something like a house or steel, or working for the government. For a further (rough) breakdown of those 7 service workers, 3 would work in retail or a bar, 1 would be a teacher or nurse, there would be 1 ‘professional,’ 1 working in finance or real estate, and the other one would be split among things like information services, transportation, and so on. (If you want the real numbers, they’re at the bottom).

Again, among all these broad categories are good jobs and bad jobs. What I hope you can see, and feel, is that opportunities and optimism are hard to find. And hope for the future is even harder. If you were talking to a teen-ager right now, what would you tell her or him to do?  Learn to love caring for the elderly, learn to like working for tips, perhaps.  Learn how to program robots, certainly.  But where are the good jobs coming from?  This should be the topic presidential candidates are talking about.  We all know the good jobs aren’t here now. What can happen to awake America’s napping engine of growth?

This is why America is so Restless. 

U.S. workforce makeup (from this table).

  • Retail – 16 million
  • Professional services – 20 million
  • Finance (including real estate) — 8.3 million
  • Education and health – 22.5 million
  • Leisure and hospitality – 15 million
  • Wholesale trade – 6 million
  • Transportation – 4.9 million
  • Information — 2.8 million
  • Government – 22 million

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RealtyTrac data; my sort.

RealtyTrac data; my sort. Lower (negative) numbers in the left-hand column indicate and area is becoming less affordable.

 

Here’s a list of affordable cities that should be familiar to you by now: Cincinnati, Charlotte, Pittsburgh, Omaha.

But here’s a list of U.S. cities that are rapidly becoming less affordable: Cincinnati, Charlotte, Pittsburgh, Omaha.

In other words, the secret is out. The good news is, many of these places are still affordable — for now. The bad news is that time might be running out.

Data crunchers at RealtyTrac have supplied Credit.com with information on housing affordability for a couple of years now. People exhausted by the rat race in high-cost places like New York and San Francisco are moving to middle-of-the-county havens like Kansas City, where wages and housing prices are more in sync, as we’ve explored in our True Cost of Living series. It turns out that combination of strong employment andreasonable housing costs make places like Pittsburgh both attractive and financially sensible.

(This story first appeared on Credit.com. Read it there.)

As much as we’d like to claim no one else has made this discovery, plenty of folks are onto the idea.We noticed last year that rental prices in places like Pittsburgh (not to mention Portland) are spiking. Now RealtyTrac data shows that affordability is fast moving in the opposite direction in many of these now-popular places.

RealtyTrac developed its own affordability index, which takes into account factors like median wages, median home prices and property taxes. This data shows that Boone County, Kentucky — near Cincinnati — is 47% less affordable this year than last year, making it the U.S. county with the fastest trajectory toward unaffordability. That’s right. Boone County — not Manhattan.

“The trend is toward less affordability, and with interest rates so low there is really no other policy lever that can be pulled to make homes more affordable. At this point either home prices need to flat line or drop, or wages need to jump, to change the trajectory toward less affordable,” Daren Blomquist, vice president of RealtyTrac, said.

Here are a few other places you might not expect to see crack the “top 25” list for areas racing toward being unaffordable, and how much less affordable they are this year compared to last.

  • Peoria, Ill. — Tazewell County (31%)
  • Richmond, Va. — Henrico County (29%)
  • Omaha, Neb. — Douglas County (29%)
  • St. Louis, Mo. — St. Louis City County (22%)
  • Charlotte, N.C. — Rowan County (20%)
  • Pittsburgh, Pa. — Washington County (19%)
  • Minneapolis, Minn. — Ramsey County (16%)
  • Toledo, Ohio (16%)
  • Des Moines, Iowa (14%)

“There are certainly some on this list that might be thought of as affordable compared to other markets, but compared to their own historical standard of affordability they are becoming less affordable,” Blomquist said.

How Long Before These Areas Become Unaffordable?

The news isn’t all bad. Many of these cities will still sound affordable to outsiders. In Polk County, Iowa (Des Moines), the median home sale price in the first quarter this year was $145,000, and that only eats up 22% of median wages. That’s good. On the other hand, median home sale prices were up 8% in the past year, while wages went up only 3%. So how long will Des Moines remain affordable forhomeowners? That’s hard to say.

That same mathematics is repeating itself around the country. In Virginia’s Henrico Country (Richmond), prices rose 27%. In Douglas County, Nebraska (Omaha), they are up 38%. In Hamilton County, Ohio (Cincinnati), they’re up 33%.

There are other places to find better news, if you know where to look. In some cities, adjoining counties are becoming more affordable while their neighbors are feeling the squeeze. Pittsburgh-area Butler County is 14% more affordable, the data suggests, thanks to housing prices and mortgage interest rates taking a dip. That’s also true in Union County, N.C., near Charlotte, where things are 14% more affordable. But even here, the data is tricky to understand. Historically, residents in Union County needed to spend 40% of their wages to buy a home, and now that’s dipped to 33% — still a high number.

Overall, more American markets are trending toward unaffordability, RealtyTrac finds. Nationwide, in the first quarter of 2016, the average wage earner needed to spend 30.2% of their monthly wages to make mortgage payments on a median-priced home ($199,000), up from 26.4% of average wages last year. And median home price growth outpaced wage growth in more than 60% of counties.

The share of counties not affordable by their own historic standards jumped from 2% of all counties a year ago to 9% of all counties in the first quarter of 2016. Compare that to 2007-2008, when more than 80% of markets were less affordable than historic norms.

“While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” Blomquist said. “The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.”

If you want to dive deeper into topics around America’s affordability/unaffordability issues, scroll through the stories in The Restless Project. 

If you’re considering buying a home, whether in one of the these locations or somewhere else, it’s important to check your credit score first. Doing so can help you have a better understanding of what rates and mortgage plans you may qualify for as well as how much house you can afford. (You can check your two free credit scores, updated each month, on Credit.com.)

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From this Trulia blog

From this Trulia blog

(If you are here just to see the Big List of affordable and unaffordable cities to start a family, scroll to the bottom).

Requiem for the Stater Home” was one of the most important stories I’ve written as part of The Restless Project, I believe.  In it, I explain that developers only want to build expensive housing or subsidized housing. At the same time, older homes are disappearing from the market via disrepair or conversion to rentals. As a result, the supply of homes available to families just starting out — starter homes — has shrunk dramatically.

First off, that leaves young families with a couple of kids stranded in two-bedroom apartments across America. But even if you don’t have children, this impacts you, too — it disrupts the entire food chain of the housing market. Without first-time buyers, homeowners can’t trade up to bigger places, and retiring couples can’t sell and downsize.

I based my story on interviews with both developers and buyers.

Now, there’s data to  prove me right.  Look at this great story on Credit.com by my colleague and friend Constance Brinkley-Badgett, based on data from Trulia.com.  The firm studied the stater home market and found that the number of available starter homes dropped by 43.6% in the past four years.

Here’s some other factoids that should bring tears to your eyes.

  • Across the 100 largest metros, 95 have shown a decrease in the number of starter homes over the past four years
  • Nine of the 10 metros experiencing the largest drop in starter home affordability – which is affected by both the number of listings and home-buying demand – are located in the California. Starter homebuyers in Oakland, Calif., would have to spend nearly 70% of their income to afford a 30-year fixed-rate mortgage on a starter home, which is 29% more of their income than in 2012.”
  • (And, worset of all) — Now, starter homebuyers would need to dedicate 37.7% of their income – a 5.6 percentage point increase (from 2012) to buy a starter home

Small families, starting out, getting squeezed even more.  If you wonder why your friend with a new baby isn’t house shopping, that’s why.  It now takes almost 40 percent of a paycheck to buy the most modest homes in many American cities. Remember, housing is considered expensive if it eats up more than one-third of income.

While this is true in plenty of cities where you’d expect the worst — like San Francisco or San Diego — it’s also true in places like Tacoma, Wash., New Haven, CT and even Providence, R.I.  In fact, if you subscribe to idea of that 33 percent cutoff, starter homes are unaffordable in 31 of the top 100 markets, according to Trulia.  And if you extend the number down to 28% of income, a more traditional dividing line, 51 of 100 markets are unaffordable to new buyers looking for a humble home.  See the Great Big List below.

There is, however, a silver lining in this data.  Another way to frame that last sentence is: Almost precisely half of U.S. markets are affordable for newcomers.  You just have to know where they are.  So in the Great Big List below, I turned the data upside down and ranked the affordable cities. The most affordable places are also depicted in the map above.

I’ve already written about life in some of these cities in my “Promised Land” series — Kansas City, Buffalo, Cincinnati, Pittsburgh.  But the list below is an even more comprehensive look at places where young people should consider moving to find affordable lives.  Do you live in any of these cities? I’d love to hear from you.

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LendingTree chart

LendingTree chart

There is much discussion about the inability of young people to buy homes — let alone move out of their parents’ homes — and how the lack of first-time buyers is hurting the entire housing market.

Plenty of charts and data, including stories we’ve run on Credit.com, show how unaffordable many big U.S. cities can be.

But a new study by LendingTree claims millennials are looking for home loans in many places. In fact, the 34-and-under crowd made up nearly half the mortgage requests that flowed through LendingTree during the past 12 months for cities like Boston, Pittsburgh and Washington, D.C., LendingTree said. Cities like Des Moines, Iowa, Minneapolis and Omaha, Neb., weren’t far behind.

“The under-35 crowd had been, for some years, hesitant to enter the housing market, but we’re seeing that start to shift,” said Doug Lebda, CEO of LendingTree. “The data all points to the fact that millennials are increasingly eager to own rather than rent, and even the incredibly high real estate prices in some markets don’t necessarily deter them.”

(This story first appeared on Credit.com. Read it there.)

LendingTree data comes with some caveats; it only represents requests for information made through the site, so the sample studied might skew tech-heavy. But the data is consistent with other studies.

RealtyTrac, a housing analyst firm, recently crunched the numbers on affordable markets and came up with similar results.

“Many of the same markets mentioned in the study … are on this list,” said Daren Blomquist, RealtyTrac senior vice president. “When filtering for affordability, the markets most likely to see an increase in millennial ownership are those with the combination of an increase in the millennial share of the population and relatively affordable homes to buy.”

Getting millennials to buy homes is incredibly important to generating a sustainable housing market recovery. First-time homebuyers are needed to help generate market activity— without them, homeowners cannot trade up into larger homes.

“The millennial generation is the key to a sustained real estate recovery and boomers who are downsizing are helping open the door for many first-time homebuyers while also driving demand for purchases and rentals in the markets where they are moving,” Blomquist said.

Numbering 43.5 million, the older group of millennials (aged 25 to 34) makes up 13.6% of the U.S. population but fully 30% of the current population of existing-home buyers, according to Realtor.com.

Millennials stuck at home also aren’t forming households, so they aren’t buying couches, lamps, refrigerators and other items associated with wider economic activity. The living-at-home phenomenon remains a big problem. In 2014, according to the Pew Research Center, 14.7% of those aged 25-34 lived with their parents, the highest percentage recorded since the Census Bureau started counting in 1960.

But LendingTree says there may be light at the end of the tunnel.

“Overall, we’ve seen a 28.5% increase in loan requests from millennials this past year over the prior one, evidence that the appeal of homeownership is strong — and growing — for young buyers,” said Lebda.

Ironically, at least some of that new demand might not be the result of better prospects for young people, but rather the punishing increases in rents, which is nudging young people towards mortgages.

That effect isn’t universal, however. In blistering-hot Portland, rents are rising faster than anywhere in the nation, according to ABODO.com.

Still, it ranked 50th of 50 markets in LendingTree’s study of places where young people are inquiring about mortgages (Only 38% of the market). Also near the bottom: San Jose, Calif., (also 38%), Aurora, Colo. (39%) and naturally, New York City (39%).

For its study, LendingTree examined request for mortgages (not mortgage applications) through its site.

“Fortunately, LendingTree’s data is typically representative of the entire U.S. population based on trends and demographics,” said spokeswoman Megan Grueling. “With that said, it is possible that it is slightly skewed, which is why we used the percentage of total requests from millennials versus other generations.”

If you want to get an idea of how much home you can buy, you can check out this home affordability calculator. (You can check your credit scores for free on Credit.com to see where you stand.) And if your credit score isn’t in good enough shape to consider buying, you can start improving your credit by checking your free annual credit report to see where you stand, and start correcting any errors you might find there.

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From WMATA Twitter feed

From WMATA Twitter feed

The entire Washington DC Metro subway will be shut down for at least a day, starting tonight.  Our nation’s capital city will have utter transportation chaos.  If there’s a more clear signal that America and her infrastructure is crumbling from within, I can’t name it.

My first reaction to this news, oddly, was “Good.”  Someone has finally made a bold decision. Exactly the kind of bold decision that might have saved a woman’s life and stopped countless completely unnecessary injuries from a system fire in January last year.  For once, let’s stop everything we’re doing, no matter the black eye, and make sure the damn subway is safe.

But my second reaction: Why would this take 15 months?  The immediate cause of the shutdown, the Washington Post says, was another fire on Monday that was close enough to the January 2015 incident that it scared Metro officials.

How does killing a woman and injuring dozens more NOT cause that reaction in the first place?  I was in DC when that happened, and the incompetence surrounding that incident was both terrifying and infuriating. Why didn’t Metro spend the past 15 months inspecting the reportedly troubled power cables?

Look, everyone in DC knows Metro’s rail lines are comically bad, and the rest of the country doesn’t care much. But it should.  DC Metro is a perfect example of what happens when no one wants to pay to fix long term problems correctly; when the worst of catty American politics turns governing into a game of freeze tag; when no one wants to take responsibility for the safety of Americans; and we let a small problem fester until it becomes an incredibly big problem.  There’s no point in recounting horror stories here; others can do a fine job of that. (A Twitter account named UnsuckDCMetro has nearly 50,000 followers). But there is a point learning a lesson here.

So, good.  Let’s keep everyone off the trains until we know they won’t kill anyone.  While we’re at it, let’s pass some emergency measures to help pay for more buses, to make telecommuting easier, and to stop ride-sharing services from gouging (this is no time for surge pricing, Uber).   My friends in DC, just pretend it’s a snow day. Stay home.  Schools, please close. The world won’t end.

And maybe on this “snow” day, we can all think about making sure what’s happened to DC Metro doesn’t happen to the rest of America.

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Pat Daneman

Pat Daneman

When the Kansas City Royals won baseball’s World Series in November, much of small-town America was rooting for them. The small-market Royals had been terrible for decades, unable to compete with big-money teams like the New York Yankees. So while rivals from Los Angeles, New York, San Francisco, and Washington, D.C., watched from home, the young team from the heart of America became world champions.

More evidence that you don’t have to be in a big coastal city to be a winner.

Kansas City is in the middle of a lot of things — it’s basically the geographic center of the United States, and, in fact, North America. It’s close to the population center, too. Often called the eastern-most western city, it’s where the Ford F-150 is built. Where Hallmark makes its headquarters. Where Garmin helps us all get where we are going. Where modern jazz was born. Where barbecue was perfected (for those with a sweet tooth). Both the Santa Fe and Oregon trails passed through Kansas City, making it the first stop in the American West.

(This story first appeared on Credit.com. Read it there.)

It’s also in the top 5 affordable cities in the U.S., according to data we published recently at Credit.com.

Pat Daneman found her way there 30 years ago because even back then, Kansas City was affordable.

“My husband had job offers in Chicago and Philadelphia as well and we picked K.C. because we wanted to buy a house and have good schools,” Daneman said. “Our first house was $90,000. I think we put down 10% and payments were about $600. His salary as a college professor was about $30K. It took me a few months to find a job. My salary was about $23K. That was 1986.”

Let’s pause on that math for a moment: their combined pre-tax income was nearly $4,500 a month; their mortgage payment only 15% of that. For a place in a suburb named Lenexa, on the Kansas side, about 10 miles southwest of downtown.

Ten years later the couple sold that house for $125,000 and upgraded.

“We were able to pay off (that mortgage) in about 10 years so we could retire early,” she said.

Daneman’s solid financial footing is critical; her husband died two years ago.

“I am in a paid-off house,” she said. “My taxes are $4,200 and insurance is $1,800… My property taxes feel high, but I think they’re still lower than my parent’s taxes were on Long Island in the 1970s.”

She visits New York often — her daughter and cousins live in Brooklyn — and she loves the big city. But Kansas City is now home for her.

“I love Lenexa and my neighborhood. There are walking trails through the woods. I walk to the grocery, drugstore, library, pool — now that I don’t work in K.C. anymore, most places I go frequently are just a few miles away. I’m close enough to Lawrence to go there for concerts and other events at KU.”

Of course, it’s not perfect. Being in the middle of the continent, Kansas City is within Tornado Alley. Daneman makes an interesting point about living in inexpensive neighborhoods: Her home is probably worth $300,000 now, which is hardly the windfall many homeowners enjoy after a lifetime of mortgage payments. (“That is the down side of affordable housing — not a lot of growth,” she said) And then there’s the decided lack of beaches.

“The worst thing about not living on the coast is no coast,” she said.

The largest employer in Kansas City is the federal government; there’s a Federal Reserve Bank in both Kansas City and St. Louis, making Missouri the only state with two. The Internal Revenue Service has a large presence in the city, as does the Social Security Administration.

Kansas City is considerably larger and better off than its Missouri counterpart 250 miles away on I-70 — St. Louis’ population has been dwindling in recent years, while Kansas City has reversed urban population decline. Today, 25% of all jobs in Missouri and Kansas are in Kansas City, but even better — 63% of new jobs added in the past year within the two states are in Kansas City.

Not everything is rosy. A report by Brookings and the Mid-America Regional Council on Kansas City’s future prospects published in 2014 fretted that the area has a “relatively sparse number of large firms” that compete worldwide; and the city’s job market seemed more sluggish than others to recover from the recession. The report blamed a lack of cross-border cooperation for some of the problem — Kansas City, Mo., and Kansas City, Kan., haven’t always played nicely together, dating back to the Civil War. Racial tensions from when Missouri was a slave state and Kansas was free persist. Crime is still a serious problem, particularly in urban neighborhoods — while the city’s murder rate in 2014 was the lowest in decades, the rate rose dramatically last year, with one murder nearly every three days, according The Kansas City Star.

But Kansas City’s ample inventory of affordable homes is just one of the reasons people people seem enchanted by the City of Fountains.

“I always thought I would move back home to N.Y. at some point,” Daneman said. “But when you live someplace for a long time, that’s hard — much harder than I thought it would be to leave Kansas, of all places … There’s no comparison as far as space, peace, traffic, even weather.”

Kansas City By the Numbers

Affordable Cities Ranking: 5th

Housing Poor Residents: 29.8%

Zillow Home Value Index : $107,800

Median Household Income: $45,376

 

CHeapest-top-10

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Globalization done wrong can be a disaster.

Globalization done wrong can be a disaster. Click for Economist story.

It’s the pay, stupid.

Bill Clinton was elected in 1992 on a simple, perceptive platform: “It’s the economy, stupid.”  Well, the U.S. unemployment rate is remarkably low, but everyone seems remarkably unimpressed. Why?  Because a job isn’t a good job.  America has about 100 million problems right now, and no one’s talking about any of them. While endless hours of network television time has been spent bickering, I’d ask you to recall anything you’ve heard about helping Americans get good jobs.  I’m going to say it until it sinks in: Wages for American workers have been flat-out stuck for a generation. Good jobs — solid, middle-class jobs that allow for a modest but comfortable middle-class existence — are disappearing as fast as land-line telephones.

Americans aren’t stupid. They know good jobs are disappearing — well-paid workers are losing out to lower-paid counterparts in China, in Mexico, and far more frighteningly, to robots.

It’s the pay, stupid.

Back in 2010, when the economy and the stock market started to perk up after the recession, professional economists fretted openly about a dreaded “jobless recovery.”  Stocks were going up, corporate profits were going up, but no one was hiring.  Turns out the jobless recovery wasn’t quite the problem. It was the good-job-less recovery.

We’re created more than 10 million jobs since the recessions. But many of those “new” jobs stink.

Sure, a 4.9 percent headline unemployment rate is positive.  Even the more inclusive “U6” unemployment rate, which accounts for the underemployment and those who’ve given up looking, is under 10 percent, a massive improvement from 2010.

But here America’s new reality. The National Employment Law Project wrote in 2014 that jobs in low-wage industries accounted for 22 percent of job losses during the recession, but 44 percent of post-recession employment growth. At the time, there were 1.85 million more low-wage workers than at the start of the recession.

That story is repeated in local economies around the country. In high-flying, tech-friendly, startup-crazed Boston, more than 85 percent of the positions added since 2009 pay less than $38,000 a year.  Gotta repeat that: 17 out of 20 new jobs pay less than $38,000.  Or monthly take-home pay of around $2,000.

What’s going on? Why are wages so stubbornly low?  When unemployment is this low, wages are supposed to go up, economists tell us. As I keep writing in The Restless Project, average-paying jobs should support purchase of average-priced housing, unless some externality is screwing with basic supply and demand.   Well, plenty of externalities are at play. You can probably rattle them off as well as I.  American workers are now competing with lower-wage workers in other countries.  Labor unions have lost just about all their mojo, so workers have little bargaining rights or leverage.  (For some reason, the people who scream about competition from China don’t support labor unions). Big data definitely favors big owners and their miserly, cost-cutting tricks over workers.

I fear all this pales in comparison to the labor shock on the way from really-low-wage workers now arriving on the scene — robots.  Here’s a thought experimentL  How many of those 1.85 million low-wage jobs created between 2010 and 2014 are robot-proof?  Only the most menial of menials tasks, I’m here to tell you.  In fact, the only safe jobs will be jobs where workers will be cheaper than the cost of robot upkeep.

We’re walking down a dark tunnel and that light at the end is a robot-powering train headed for us.

So, who has a plan for dealing with this, America’s real middle-class crisis?

Bernie?  Donald?  Hillary? Jeb!? Marco?  Ted?  John?  Anyone?

Let me give you a head start. For decades, economists have extolled the virtue of letting markets and trade run fee.  Lower trade barriers lead to more movement of money and goods, and that eventually benefits everyone.  While that seems to be true…eventually being the key term… *some* economists are finally starting to recognize that people suffer during this process.  A lot. For a long time.

Economics is called the dismal science for a reason. Economists seem way too willing to allow people to suffer while holding to their macro-economic theories which work nicely on perfect planets.  Here on the dirty earth, things get messy.  To wit: It’s generally believed that lowering trade barriers between low-wage and high-wage nations will make everyone richer, even folks who lose high-paying jobs to new competition, because they’ll simply get better jobs. Sadly, folks tend to skip over where those better jobs will come from, other than perhaps a token mention of “retraining.”

Here’s a great Economist story about this major concession economists are starting to make:

“Competition from Chinese imports explains 44% of the decline in employment in manufacturing in America between 1990 and 2007. For any given industry, an increase in Chinese imports of $1,000 per worker per year led to a total reduction in annual income of about $500 per worker in the places where that industry was concentrated.”

Substitute “robot” for Chinese worker and you’re going to see the same result.

Now, you can’t stop globalization, and we really can’t stop robots either. The terrible habit we have here in America is thinking that things will magically work out if we just close our eyes and keep walking down that dark tunnel.  Check that, if we just send other people to walk down that dark tunnel for us.

Workers need help.  And they are getting precious little. The same paper quoted above found that government spending on essentials like retraining after trade reform was only $58 for every $500 on lost wages.

That’s a raw deal.

America has been dismal about preparing our workforce for the 21st Century economy. Sure, there are some unicorns who combine luck and ingenuity to create apps that are worth billions, like Uber. But the vast majority of jobs Uber and its ilk create pay less than $15 or $20 an hour.  And all those jobs are destined to be filled by self-driving cars, anyway.   We force kids to borrow 5 or 10 years income to attend college and graduate school now; we certainly aren’t capable of helping mid-career adults learn something new.

So what do we do? Here’s part of the solution, as the Economist puts it:

“Generous trade-adjustment assistance, job retraining and other public spending that helps to build political support for trade are therefore sound investments. To make any of these policies work, however, economists and politicians must stop thinking of them as political goodies designed to buy off interest groups opposed to trade. They are essential to fulfilling trade’s promise to make everyone better off.”

Bernie? Donald?  Hillary? I don’t care about making America great again. How about making America safe for the middle-class again? How would you do that?  Building a wall and raising tariffs is one idea, but probably a terrible and temporary one. Lowing college loan interest rates by a point or two?  OK, sure, that’s nice. Bernie Sanders comes closest to giving this middle-class angst a voice, and I enjoy a good Wall Street bash-fest as much as anyone, but I sure would rather hear more detailed plans for precisely how his administration would help create an environment that will encourage creation of good middle-class jobs.

You know, and I know, and they know, that the train is still headed right for us.  Wages have been stagnant for a generation, under both Republicans and Democrats.

It’s the pay, stupid.  The jobs.  The *good* jobs.  Where will they come from in the early 21st Century? Let’s talk about that.

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Click below to read earlier stories on Pittsburgh, Oklahoma City, Buffalo, Columbus and Raleigh

Michelle Nix has lived in a lot of places: Milwaukee, Chicago, St. Louis, Oakland, Calif. But when it came time to start a family, she went home to Cincinnati.

Smart move. The once-battered Midwest city is in the middle of a radical transformation – and it ranks 8th in our recent list of affordable U.S. cities.

“It’s a great Midwestern city. It has almost anything you could want,” Nix said.

Nix and husband Stephen spend only about a quarter of their income on mortgage payments for their three-story brick shotgun-style home on the city’s north side, where they are raising Theo, 2, and Fritz, who’s 6 months old.

(This story first appeared on Credit.com. Read it there.)

“(Cincinnati) has some delicious restaurants, dive bars, fancy bars, breweries, beautiful parks, two decent sports teams, college basketball, great niche neighborhoods and really nice, good-hearted people,” Nix said.

Cincinnati’s strategic location on the Ohio River made it a boomtown in the 1800s, thanks to steamboats, which helped connect the frontier of the fledging U.S. with the Port of New Orleans and the rest of the world. Some historians say it’s the first major city formed after the American Revolution, making it the first distinctly American city, so perhaps it’s no surprise that the Cincinnati Reds were the first professional baseball team.

Michelle Nix, with children Theo, 2, and Fritz

Michelle Nix, with children Theo, 2, and Fritz

The city also borders Kentucky and the slave states of the South, which made it a crossroads for racial tension during the Civil War era.

Like most Rust Belt cities, it suffered mightily as manufacturing declined and well-off residents fled to the suburbs during the second half of the 20th century.

But the city is undergoing a major urban renewal, highlighted by an ambitious project known as The Banks – mixed-use housing and commercial development along the river, bookended by baseball and football stadiums.

The renewal has paid off. General Electric recently announced it was moving its Global Operations center to the city, creating nearly 2,000 jobs. A low cost of living for employees and a new streetcar transportation option helped the city win over GE. Cincinnati is also home to corporate headquarters for Kroger, Procter and Gamble, and Macy’s. And it enjoyed 2.5% growth last year, the highest in the Midwest and among the highest in the country.

While the city itself has a modest population of 300,000, down almost half from its heyday in the 1950s, the surrounding metropolitan area (including parts of Kentucky and Indiana) includes 2.2 million, making it a top 25 market in the nation.

Its central location helps make up for what some residents might be missing living in the Midwest, Nix said.

“I think Cincinnati doesn’t have the same cultural events and activities like some bigger cities. Also, the music scene and theater are here, but we miss some bigger names to other cities,” she said. “We’re a 2-hour-or-less drive from Indy, Louisville and Columbus.”

On the other hand, with a median home sales price of $133,000, and a median household income of $56,000, many Cincinnati residents can meet their financial goals and still afford a trip or two to catch a Broadway show. Or in Nix’s case, a trip to Brooklyn to visit friend and author Caroline Zancan, and to marvel at real estate prices in one of America’s most expensive cities.

“I don’t see how they afford it some time,” she said.

Read earlier stories on: Pittsburgh, Oklahoma City, Buffalo,  Columbus and Raleigh

Cincinnati by the Numbers:

  • Affordable Cities Ranking: 8th
  • Housing Poor Residents: 30.4%
  • Median Home Sales Price: $132,500, per Trulia
  • Median household income: $55,729 per Fact Finder

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No longer drowning? More homeowners floating above the waterline, finally

February 5, 2016 The Restless Project

Call them the invisible victims of the housing collapse: The millions of homeowners who’ve spent nearly a decade dutifully making mortgage payments on homes worth less than the balance of their loans. Known as “being under water,” many in this crowd were never in danger of losing their home. But that doesn’t mean they didn’t […]

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