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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Chart: Federal Reserve Bank of Atlanta

Chart: Federal Reserve Bank of Atlanta

You may have heard some buzz recently about first-time home buyers, with millennials sitting on the sidelines instead of jumping into the housing market.

Well, it’s not just them. Basically, Americans in every age group under 65 are showing historic reluctance to own homes, according to an email from Ellyn Terry, an economic policy analysis specialist at theFederal Reserve Bank of Atlanta.

First-timers represent only 30% of the market, when they should be more like 40% — historically, the long-term average, according to the National Association of Realtors.

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

And just last week, Credit.com reported on a survey that found young buyers want to skip the starter home and wait for their dream home.

Why? Terry speculates that high debt, high cost, as well as shifts to a more urban society and shifts away from the desire to own homes are just a few of the reasons. But those factors are hardly limited to young people.

“To the extent that these factors are true [for Millennials], they may be affecting the decisions of other generations as well,” she wrote in a recent post titled “It’s Not Just Millennials Who Aren’t Buying Homes.”

First off, homeownership rates for all Americans — young or old — have fallen since the housing peak of 2005. That makes sense; most weren’t spared by the housing bust.

It’s surprising to learn that homeownership rates fell even harder among older Americans, however.

“Homeownership among young Generation Xers has fallen by a bit more than the millennial generation since the housing peak — declining 11 percentage points since 2005 compared with a decline of 9 percentage points for those under 35-years-old,” Terry wrote.

Historical context is critical, however. Homeownership rates in the last decade were artificially elevated because of the housing bubble, so it’s worth comparing them to levels before the boom. By some measures, the overall homeownership rate — at around 64% now — stands at roughly what it was in the mid-1980s and ’90s, before the factors that started the boom were set in place.

That hardly tells the whole story, however. Ownership rates for every under-65 age group — under 35, 35-44, 45-54, and 55-64 — have fallen to below even their mid-1980s rate. So why is the overall rate flat?

You can see what’s going on in the chart below — the rate of older owners is higher than the mid-80s, while the rate among all other groups is lower.

In a different study, financial adviser Joshua Brown cites Bank of America research claiming the effect is even more dramatic for much older Americans. Among the 75+ crowd, homeownership rates soared from 73.6% in 1994 to 78.6% in 2014 — a span during which the rate fell for everyone between the ages of 25 and 65.

In some ways, this makes sense: Americans are living longer, and staying in their own homes longer. That means a bump in the total number of older Americans, “an age group that always has higher homeownership rates,” according to Terry, is skewing the statistics. But it’s also another sign that the underlying fundamentals of America’s housing market remain shaky.

If you’ve read this far, perhaps you’d like to support what I do. That’s easy. Sign up for my free email list, or click on an advertisement, or just share the story.





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RealtyTrac data

RealtyTrac data

There’s been a lot of talk lately about why first-time home buyers are sitting on the sidelines. Here’s some data that may help explain why: Low-cost starter homes are simply disappearing from the market, and the ones that still exist are being gobbled up by investors and turned into rentals at a stunning rate.

The stark numbers, prepared exclusively for Credit.com by RealtyTrac, tell the story. Back in 2000, 70% of all single-family homes were sold for under $200,000. Five years ago, the rate was 63%. This year, the rate is 48%. (All rates include only January to May sales from each year, for consistency.)

In other words, sales figures show that inexpensive homes are disappearing from the market.

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

That’s not the lowest-ever rate. But the only other time this century that sub-$200,000 sales fell below 50% was during the height of the housing bubble, when prices were far above historic norms and lending standards were almost non-existent. Today’s lack of $200,000-and-under inventory is leaving first-time home buyers with few decent options. And many of those options are being soaked out of the market by people who have no intention of living in those homes.

Another proxy measure for starter homes is three-bedroom homes, exclusive of price. When the market is examined that way, there’s a little good news, but a lot of bad news. The share of three-bedroom homes sold around the country has not fallen — in fact, it’s remained consistent at just more than 50% the past 15 years, RealtyTrac says.

But that datapoint obscures an ominous reality. About 29% of three-bedroom homes purchased in the past 12 months are not owner-occupied; in most cases, they are now rentals.

“After looking at the data, the conclusion I come to is that the starter home has not disappeared, but a starter home sold in recent years is much more likely to be a rental property than a starter home that was sold before the Great Recession,” said Daren Bloomquist, senior vice president of communications for RealtyTrac.

That means young families looking to buy smaller homes must duke it out with investors over a dwindling supply of cheap properties.

The homes-to-rentals conversion process began in earnest during the housing bust, when investors could scoop up foreclosed homes at bargain prices and turn them into rentals. But it’s clear that process has continued even as distressed properties have been gobbled up and taken out of the market.

In a separate study from last year, RealtyTrac found that cities like Memphis, Charlotte, Atlanta, Jacksonville and Oklahoma City had the highest rates of institutional investor single-family home purchases.

The new data is consistent with a prediction made by The Urban Institute last year, which suggested that between 2010 and 2030, the majority (59%) of the 22 million new households that will form will be rentals, while just 41% will buy their homes.

Renting instead of buying can be a wise choice.

Yet there are plenty of reasons young adults are hesitating to buy homes, the Urban Institute found — chief among them, the “American Dream” of homeownership took a beating during the housing bubble collapse.

But mortgages offer one advantage that renters don’t have: consistent monthly payments. As the supply of available rental properties shrinks in many U.S. cities, rents are skyrocketing at record rates.

And some observers warn there will be unintended consequences as the shift from a nation of buyers to a nation of renters continues.

“Most household formation in this cycle has been renting,” said housing expert Logan Mohtashami. “Are we at the beginning of a sociological movement away from middle-class homeownership and toward a cultural split between the investment property landlords and their renters, both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners?”

If you’ve read this far, perhaps you’d like to support what I do. That’s easy. Sign up for my free email list, or click on an advertisement, or just share the story.





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Nlich.org. Click for full graphic

Hourly wage required to afford a typical two-bedroom apartment in each state. Nlich.org-click for full graphic.

You probably won’t be surprised to hear that there isn’t a single state in the U.S. where a worker earning minimum wage can afford the rent for a two-bedroom apartment — or, for that matter, a one-bedroom apartment. You might be surprised to learn that there isn’t a state where renters earning average pay can afford a two-bedroom apartment, either.

(This story is part of my Restless Project: Why Americans Can’t Sleep at Night.)

The National Low Income Housing Coalition crunched the numbers recently and found that a toxic mix of stagnant wages and rising rents has made things really difficult on a wide swath of U.S. wage-earners. It calculated a “housing wage” by determining how much workers would have to earn hourly to afford a “fair market rent” apartment for 30% of their income. By that measure, the national housing wage is $20.30 for a two-bedroom unit and $16.35 for a one bedroom — both far above even recently increased minimum wages.

But in many parts of the country, the numbers are even bleaker. Near Washington, D.C., the two-bedroom rental wage is about $31 an hour. In New York, it’s $27. In Maryland, it’s $26. In fact, in six staes and D.C., the housing wage is north of $25 an hour, the report says.

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

Another way of expressing the same problem: Using the national rates, a worker earning the federal minimum wage of $7.25 per hour would need to work 2.8 full time jobs, or approximately 112 hours per week, to afford a two-bedroom apartment. That renter would need to work 90 hours to afford a one-bedroom, according to the report.

“In only twelve counties and one metropolitan area is the prevailing minimum wage sufficient to afford a modest one-bedroom apartment,” the report says. Those regions are all in West Virginia and Washington state.

Meanwhile, the average hourly wage of renters in the U.S. is $15.42, which is $4.88 less than the two-bedroom housing wage.

“In no state is the mean renter wage sufficient to afford a two-bedroom apartment at the fair market rate,” the report points out.

Here’s one example of the troubling numbers at work:

In Washington state, fair market rent on a two-bedroom apartment is $1,203. That means a worker needs annual earnings of about $48,000 to afford that unit, or $23.13 per hour. Based on the state minimum wage, a worker would need 2.4 jobs full-time jobs to afford that. The real average renter wage in Washington is just $16.69, meaning a worker with an average-pay job needs 1.4 jobs to afford a two-bedroom place. In King and Snohomish counties, the region’s most expensive areas, the housing wage is much higher: $29.29.

Part of the problem is skyrocketing rents due to high demand and low supply. Vacancy rates are at their lowest levels since 1985, and rents have risen at an annual rate of 3.5%, the fastest pace in three decades, according to the housing group.

Another part of the problem I’ve written about before: Builders are less interested in constructing medium-prices housing at the moment for numerous economic reasons, preferring mostly high-end construction. This impacts availability of starter homes and rental units.

The National Low Income Housing Coalition says it is using a trust fund to help communities build and rehabilitate affordable rental homes.

“It is also critical to preserve and improve the nation’s public housing stock, expand the number of housing vouchers, and increase funding for other programs providing affordable housing to truly end this crisis,” the report says.

What is the housing wage for your state? You can find out on the map on this page. Remember that your earnings are only one of many things that determine your ability to find housing. Your potential landlord will probably look at a version of your credit report as part of your rental application, and badcredit rating or a history of payment problems could make it harder to find a place to live. A pasteviction could be really problematic, as well, though it may not be a deal breaker.

It’s a good idea to review your credit before looking for housing, so you can check it for errors as well as be upfront about anything a landlord may find during a credit review. To keep track of where you stand, you can get a free credit report summary, updated monthly, on Credit.com.

If you’ve read this far, perhaps you’d like to support what I do. That’s easy. Sign up for my free email list or click on an advertisement.



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Levittown, on New York’s Long Island, new starter homes were plentiful in the late 40s and 50s. Click to visit the Instant House blog, a tribute to manufactured homes.

Levittown, on New York’s Long Island, new starter homes were plentiful in the late 40s and 50s. Click to visit the Instant House blog, a tribute to manufactured homes.

Young would-be home buyers are still sitting on the sidelines of America’s housing market, with first-time homebuyers representing a decades-low share. Student loans, high prices and low credit scores have all been blamed for this, but Bank of America recently proposed a different explanation.

Perhaps they’re just being patient.

Young adults don’t want starter homes, the bank said when explaining the results of a recent survey; they want to wait until they can buy their dream home and perhaps the home they’ll grow old in.

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

“Seventy-five percent of first-time buyers would prefer to bypass the starter home and purchase a place that will meet their future needs, even if that means waiting to save more,” the bank says. “Thirty-five percent want to retire there.”

When asked why they haven’t bought a home, 56% told researchers, “I don’t think I can afford a home or the type of home I’d want.”

California loan agent and housing expert Logan Mohtashami said he’s seen evidence of this in his own sales. Younger folks are looking for larger homes, he said, specifically “more three-bedroom detached homes. That means no condos for them.”

But while patience is a virtue, so is facing reality. There’s a chicken-and-egg problem with claiming that would-be buyers are simply waiting and saving: There are very few starter homes for them to buy. Would these young people feel differently if they actually had options?

To understand the question, let’s back up a bit and get into the numbers.

The housing market is hot — home price listings are up 9% nationally from one year ago, according to Realtor.com. But the market is still broken. Only 30% of homes are being sold to first-time buyers, when the historic rate is 40%, according to the National Association of Realtors (NAR). The absence of (mostly) young first-time buyers creates problems all the way up the housing market food chain, making life difficult for families looking to sell and trade up while turning millennials into a generation of apartment dwellers.

Or perhaps it’s not really a problem. It’s possible some homeownership attitudes are changing, and trading up is becoming a thing of the past. Older generations were very comfortable buying smaller homes and moving as their families grew. Today’s buyers are used to much larger homes — the average home built in 2016 is 2,500 square feet, compared to 1,500 square feet in the 1970s, Mohtashami said.

Meanwhile, long-term trends suggest that Americans — both first-time buyers and trade-up buyers — are staying in their homes longer. A study by the National Association of Home Builders shows families moved after 11 years in 1987, on average, but stayed 16 years in 2011. The research is skewed by the housing recession, but the long-term trend is still for buyers to stay in their homes longer.

Maybe we should call millennials the “one and done” crowd.

But back to the chicken-and-egg problem. First-time home buyers have an average student loan debt of $25,000, according to NAR, which puts a serious damper on home-buying dreams. NAR thinks that debt delays saving for a down payment by an average of three years.

But debt is only one of the obstacles young people face.

“There are several reasons why there should be more first–time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for those college-educated and the fact that renting is becoming more unaffordable in many areas,” said Lawrence Yun, NAR chief economist at NAR. “Unfortunately, there are just as many high hurdles slowing first-time buyers down. Increasing rents and home prices are impeding their ability to save for a down payment, there’s scarce inventory for new and existing homes in their price range, and it’s still too difficult for some to get a mortgage.”

Where Are All the Starter Homes?

The disappearing starter home is one element of the equation that some have overlooked, but it’s critical. Five minutes on any realty website can offer a tough dose of reality to anyone dreaming of buying a first home.

Sales of $200,000-and-under homes dropped the past two years, according to RealtyTrac. And many of the existing cheaper homes — often made available through foreclosure during the recession — have been snapped up by investors and turned into single-family rental units. A report last year from Harvard’s Joint Center for Housing Studies found that the recession added 3.2 million more single-family home rental units, “unprecedented” growth in this part of the market.

Then there’s the new construction problem. Builders just aren’t building $200,000 homes right now for a simple reason: Larger homes mean larger profit margins. BuilderOnline.com did a great job of breaking down the math in a story last year:

Making a $200,000 home work as a home builder is junior high–level arithmetic. Solving for profit — say, 20% — land and building direct costs cannot exceed $160,000. Problem is, a 20% margin on a sub-$200,000 house has become frighteningly elusive in the past decade.

The lowest build cost is around a $50 a foot,” says David Goldberg, a home building and building products manufacturers analyst for UBS, New York. “If you do a 2,000-square-foot house, which is what you’d have to do to compete with existing stock, that leaves you with $100,000 of sticks-and-bricks cost. The maximum cost on the land would be $60,000.”

So back to the original proposition: Are young people staying in apartments or living with their parents because they are patient or because they are hopeless? The answer, no doubt, lies somewhere in the middle. But when young people say they are simply waiting until they can afford the home they want, you have to wonder if they are being patient or simply sparing themselves the heartache of shopping for a unicorn.

If you’re in the market to buy a home, it’s a good idea to check your credit before you apply, since a good credit score will help you qualify for better terms and rates. You can see where you currently stand by viewing two of your credit scores, updated each month, for free on Credit.com.

If you’ve read this far, perhaps you’d like to support what I do. That’s easy. Sign up for my free email list, or click on an advertisement, or just share the story.





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Yes, this hat costs $30. I wish it were affordable.

Yes, this hat costs $25. I wish it were affordable.

A friend posed a question recently that’s particularly relevant to our current national conversation:

When, exactly, was America great?

The question is on everyone’s mind, thanks to Donald Trump’s surprise ascendancy to star in the world’s biggest reality TV show, our presidential election.  His central theme, or at least the theme of his hats, is a promise that a Trump administration would “Make America Great Again.”  That promise does lead to a logical question.  When was that?  What would it be like?

“I do wish those who want to make America great again would pinpoint the exact era we were perfectly great. Give me a decade, even,” my friend said.

There is an answer, I told him. Back when families with a decent income could afford food and shelter. In the 1950s.  More in a moment.

First, let’s try to suspend our love or hatred for politics and particular politicians for a moment. Let’s also suspend the implied message of my friend’s question: That old farts with bad memories and nostalgia-poisoned hearts are yearning for a past that never really existed. That’s always true.  Let’s take the question at its face. Because it hints at what I’ve been writing about in The Restless Project for the past couple of years.  And I think it also helps explain both the Trump and Sanders phenomenons.

When I was in grade school, I remember a social studies textbook with a chapter titled: The American Century: 1950-1963. My teacher was annoyed that none of us got the joke.  I remember my embarrassment at missing the sarcasm. What was supposed to be the American “Century,” she pointed out, lasted only about a decade. Why? The afterglow of winning World War II could only outshine America’s deep social flaws for so long. No one in their right mind would trade our time for that time. President Barack Obama has been making this point repeatedly at graduation speeches and in interviews for the past year or so, and he’s right when he says, “Even with today’s challenges, this is the best time in history to be alive.”

Still, when folks yearn for something in the past, they vaguely mean the 1950s. And in one way, they are quite right.

Since the 1950s, the relationship between income and living expenses in America has broken down disastrously.  Back then, workers earning minimum wage could earn enough in about 10 days (56 hours) to pay a month’s rent – roughly one-third of income.  Don’t try that now.

Moving up the income chain: In 1950, the average family income was $3,300, and the median home price was $7,354. In 2014, family income was $51,017 and median home price was $188,900. (Source) The ratios are completely out of whack now.  Homes cost nearly four years of family income, vs. less than three in the 1950s.  And recall that because many households now include two incomes, not one.

People are working harder – or at least, double the time spent on labor – for less.  Most critically, as I’ve chronicled repeatedly, people with average incomes can’t afford average homes. That’s why so many people feel like they are running around on a rat wheel.

There are 100s of caveats to these data points. You could easily convince me that two office jobs today are nowhere near as tough as one factory job in the 1950s.  People’s homes are bigger, and full of far more amenities, they 1950s homes.  We also have cheaper clothes, and televisions, and all manner of creature comforts.

Still, there’s a deeper issue at play.  The social contract, the American Dream that those who works hard can earn themselves a decent living in America has broken down. Sure, you can afford a large television and Netflix.  But where will you start a family? Every young person I know is on half-crazed scavenger hunt trying to find some affordable neighborhood in America’s great cities – New York, San Francisco, Seattle, Portland. We are driving ourselves nuts.

Plenty of folks have made similar observations in different ways. Liz Weston, a treasure of financial writing now at NerdWallet.com, recently observed that Americans are pissed because they own so much less than they did a generation ago. Personal wealth – largely a measure home value – has fallen 20 percent for the middle class since 1998. And the value of the possessions owned by America’s working class has fallen by half since then.  By half!  You hear folks complain that their kids won’t be better off than they were; that’s putting it nicely. Americans, from the poor up through the middle class, are losing ground. Fast.

“This is not a few families getting in over their heads. This is a tsunami threatening to drown the American dream,” Weston wrote.

For many reasons, it is foolhardy to wish for the past.  We all know that in the 1950s, the American Dream was just a myth to entire swaths of the population.  Make America Great Again is an insult to them.

But if someone made a hat that said, “Make America Affordable Again,” I’d wear it. Because there was a time…

America is yearning for a genuine discussion of how we got from there to here, and better yet, how we get back there. Sadly, we’re busy buying $25 hats, or making fun of those who do.  Not great, America. Not great.

If you’ve read this far, perhaps you’d like to support what I do. That’s easy. Sign up for my free email list or click on an advertisement.



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MoonlightingApp.com offers tools to help workers earn extra cash on the side. You can do it yourself, of course

MoonlightingApp.com offers tools to help workers earn extra cash on the side. You can do it yourself, of course

I call it “21st Century Moonlighting.”  Others call it the “sharing economy,” the “gig economy,” etc.  Whatever the name, I think one key to thriving (surviving?) in the digital economy is finding ways to supplement your full-time income.  Etsy. Uber. Airbnb. Whatever.  We all know incomes are stagnant, so the only way to significantly raise your income is to find side projects.

Turn your hobby into a small business. Even if you only have a few hours a month to devote to your “moonlighting,” get started now. Learn the mechanics of the sharing economy. Learn the attitude of being a small-time entrepreneur.

In this piece I recently wrote for Credit.com, I argue that mastering moonlighting might be the difference between a happy and a messy retirement. The numbers are clear. Take Social Security as soon as you can, at age 62, and you’ll get about half as much every month.  Postpone Social Security until 70, and you’ll get twice as much every month. For life.  By my rough calculation, waiting from 62 to 70 is the equivalent of having an extra quarter-million saved in a 401(k) (assuming you can turn $100,000 into about $400 a month of income).   Navigating those 60s with a part-time retirement, funded by some sharing economy income, and your future is much brighter.

Don’t think about this when you are 60. Think about it in your 40s and 50s.  How can you turn your assets and talents into a little extra income?

By the way, I’m not saying this is a good thing. The fact that Americans’ future are so fragile — that so many are destined to ‘retire’ as Walmart greeters — is a bug, not a feature, of our economy. That’s the point of The Restless Project.   But I’m also convinced that folks who face reality on this front will be far better off than folks who don’t 0r can’t.


How to Delay Taking Social Security Benefits Until You Absolutely Have To

I recently heard about a man who was retired longer than he worked, retiring at 52 and living well into his 90’s. There’s a life worth living.

(Originally published on Credit.com.)

And it’s not that far-fetched. Life expectancies continue to inch upward, particularly for those who make it to retirement. For those who reach age 65, life expectancy stretches to 82 for men and 85 for women. For married couples who reach 65 together, the news is even better. Odds are 45% that at least one of the partners will live to 90, giving them a full 25 years of traditional “retirement” time.

How Will They Pay for That?

Reminder: This is a good problem to have — far better than the alternative. It’s important to have a long-lasting plan for the golden years so you can enjoy them as long as possible.

Like everything else that has to do with money, time can be your friend or your enemy. It’s critical to start thinking about life in your 70s, 80s and 90s as soon as possible. Yes, that means doing so in your 50s and 60s, and perhaps even earlier. You likely don’t want to get to your golden years and rack up a lot of credit card debt to pay for the essentials.

Factoring in Social Security

For many, the most crucial variable in this equation revolves around when to start collecting Social Security benefits. The simple answer is to take it as late as possible, which is currently at age 70, though every individual situation is different. The earliest you can make this decision is at age 62, so you can plan accordingly, which begins with giving yourself options by planning years before retirement arrives.

Americans who paid into Social Security can begin receiving benefits as early as age 62 — before the traditional 65-year-old retirement age — but that comes at a price. Younger recipients receive smaller benefits to account for the added years of payout. On the other hand, recipients can chose to postpone benefits until age 70, which results in a “bonus” that lasts the remainder of the person’s life. The difference is dramatic — an extra 8% per year for those who wait past retirement age. An example from the Social Security administration shows that a recipient who takes payments as early as possible and deserves $1,000 per month at retirement would instead receive $750. If that same person waited until 70, they would get a monthly check of $1,320.

If you opt to wait to collect Social Security, you’ll be expected to use your own money, which can come from a combination of private retirement savings and continued income. Because it’s to your benefit to preserve your retirement savings as long as possible, continuing to earn income through your 60’s is an optimal option.

Older Americans in the Workforce

In many ways, things are getting harder for older workers. Studies (like this one) show older workers have a harder time even getting through the door for job interviews as many employers are hiring those from younger generations because they’re less-expensive and have more experience with technology. Plus, when layoffs and buyouts roll around, more expensive (often older employees who have spent many years with the company) are typically targeted.

But there are bright spots in the digital economy that can help older workers keep the money coming in as they work to reach the 70-year-old finish line — particularly in the sharing economy.

Whatever you call it — part-time work, contingent work, gig economy work — some only-in-the-digital age income streams are ideal for older workers who need some income but don’t want to be tied down to a full-time job. Some of these positions are challenging for those who need to support a family, like driving for companies like Uber or selling homemade crafts on sites like Etsy. But these can be ideal roles for folks who are simply looking for supplemental income. For example, Uber announced a partnership with AARP last year, hoping to recruit senior drivers.

What’s more, the sharing economy also creates new ways to earn income from assets you’ve acquired. It’s easier than ever to turn your summer cabin into a part-time vacation rental, for example, thanks to services like Airbnb. One extreme, but potentially lucrative, step is to downsize to a smaller home in a less expensive area while renting out a paid-off home in an pricey neighborhood for a few years. Newer sharing economy services even let people rent out their cars or other personal items.

Many older workers may fail to realize the value of their accumulated knowledge. In the past, some made small consulting agencies and, while that’s still an option, the proliferation of online course tools now make it relatively easy to teach digital classes in everything from cooking to coding that consumers can (and do) pay for. Many folks are learning how to turn their hobbies into small-time entrepreneurial adventures this way. For example, Angela Fehr, a self-taught artist in Vancouver, Canada, offers classes in watercolor painting and they range in price from free to $99.

The key to this is nurturing hobbies, and the entrepreneurial skills needed to monetize them, before staring at a big income hole in your early 60s. Play around with online course software, ask questions and pay attention to other sharing economy developments.

Taken collectively, I call all these revenue-generating opportunities “21st-Century moonlighting.” It’s not for everyone, of course. Plenty of folks are busy enough trying to hang onto their full-time jobs in competitive environments. But mastering the “gig economy” and supplementing a full-time income may make it easier to postpone reliance on Social Security. And maybe even avoiding any boredom that sometimes comes with retirement, too.

Deciding when to start receiving Social Security is a personal and complex subject, made even more complicated when a partner’s benefits are part of the decision. It should be made carefully, possibly even with the advisement of an expert. To start, you can read this article to see if you are financially ready for retirement or use online tools to get an idea of when it makes sense to start receiving benefits before age 70.

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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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The Great Big List of U.S. cities where you can’t afford to start a family (and dozens of cities where you can!)

March 29, 2016 The Restless Project

(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 […]

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