Life in the suburbs of Rob and Laura Petrie - the upper middle class burbs of Westchester outside NYC - is showing a lot more signs of stress.
The housing market - which stayed stable for far longer here (because of our close-in proximity to NYC)- is moribund. A recent article in Forbes on the 'most expensive zip codes in America' (we're pretty far down on the list - which has most of the locales in Westchester listed somewhere) vastly underrepresented the number of houses up for sale and the time to sell. Truth is that few people are even bothering to list their houses - nothign is selling. One record selling agent had 2 closings in 2008 and none this year. She's getting calls regularly from people she sold to in the past few years inquiring about selling but her advice is 'don't bother, nothing is selling'. No point in establishing a history as 'stale'. Even when you have a buyer they can't get a mortgage - even with stellar credit ratings. But you CAN refinance if you have enough equity (they don't want to lose business to a competitor). Nonetheless you think rates would be lower since the Fed is basically 'loaning' money out for nothing.
Continued.....
There are a lot of people who would LIKE to sell - lots of households where one earner has lost their jobs and they can't afford the mortgage any more. Real Estate agents might say privately that there are more than a few people sounding a bit desperate - a surprising number of recent buyers who overreached and can't keep up after a job loss. But then that was the case in the late 80's too. I remember a guy working for the local fuel oil copany talking about recent buyers up from Manhattan - how first the wife's Jag would disappear, then the Husbamd's BMW and then the house would be up for sale with both gone from town.
Frankly, you had a LOT more houses up for sale after the late 80's housing bust - but then you still could GET a mortgate - albeit at 9%. We bought around Gulf I totally stretched to the limit with a mortgate at almost 8 1/2% (and we paid points to get that). But we paid median price for far more than a median house - though it needed months of work before we even considered moving in (and to date has over 10,000 hours of my labor in it). But then with the run up in prices I expect that most of those that NEED to sell can't afford the price cut that would be needed now - even if buyers could get a mortgage. And with the Manhattan market down, you don't have the easy 'flip money' available for a downpayment on the house in the burbs. They are back to wanting 20% again........
More than a few divorced couples are still in the same house - the husband (usually) can't afford to move out. Makes for an awkward situation living in the sunroom or guest bedroom.
But then there are enough other people who planned on selling after retirement - or after their kids got out of school who can't afford the taxes any more. Local property taxes are brutal - and have tripled in my just under 10 year tenture here. School taxes are horrid - and will only get worse as people move out of Manhattan when his hit school age. The local taxes are cheaper than paying private school tuition. You're really in trouble if your income hasn't kept up..... one teacher would love to bail (his last graducated and is in college) but nobody is buying..... and while the schools are adding admnistrators, they're cutting back on teaching staff and extra stipends for things like club advisors (those at the ipper levels take care of the others at upper levels - we have an absurd number of 6 figure people doing .....just what nobody seems to know.....).
There's a growing revolt against school taxes (being 'affluent' our district gets little aid) though the adminstration is proud at spending 'less than the average' per student for our county. It shows. There was a large exodus of retirees after a major school bond issue passed - with those houses filled with Manhattanites arriving with lots of kids - pushing school enrollment projections out the window. And with one snobby neighborhood not wanting their children to go to the 'poorer' school, we're now doing an addition on an elementary school they almost closed 20 years back. Apparently the temporary classrooms used back in the 60's and 70's when enrollments were even higher won't do now. It's ionic that elem school parents scream like mad about wanting everything in school.... things like reading teachers to make up for the lack of time that parents spend reading to their own kids (who are left with nannies that often don't speak english all that well). Of course by Middle School many of those same parents don't have a clue what their kids are doing in school - or care.... more than a few are getting divorced and leaving their children living a semi-feral existence. By the time your children are in high school, you have very few parents even aware of what's going on. If they were, they'd be horrified. The top 15% of the kids are astounding - accomplished beyond what you can believe - but the middle ground has little attention paid to them (with the best there being sent to private parochial schools that DO pay more attention to the 'average' student). This school system THINKS they are really good - a meme pushed by real estate agents. But reality is that they should be far better.
It's really sad at how kids with so many advantages fail to do better than what you see. But then that was the case even in good times. Now though class size is getting larger and they're dropping many Honors classes - leaving a larger dichotomy between AP and 'regular'. But schools are a whole topic on their own........ Parents want 'the best' but can no longer afford what that costs.... and schools, quite frankly, have their priorities wrong. But then parents want to see all the gee-whiz stuff on the one night a year they actually go to the school, while teachers say they could do fine with a blackboard and chalk........
Even if you 'did he right thing' and bought 'cheap', have been paying your mortgage and not been taking any money out - it can be hard. Your local property taxes can exceed your mortgate payments for the year. And if you're paid off.... own free and clear with kids long out of the house - there's no point in paying tens of thousands for a school system you're not using. Even a 'starter house' here is going to pay $20,000 in property taxes. Part of that is the end result of State and Federal government dumping costs down on local government so they can claim to be 'cutting costs'. But even if you want to stay in the area - there's no place to go if you want to 'downsize'. The only decent co-ops are as much as a house.
You've got more than a few people out of work for a while now - some have gotten new jobs but others...... you have a few still living off severance packages - they're not even counted as 'unemployed' yet. In some cases the unemployment is leading to severe stress in the family - some people are not handling things well. You're seeing some intersting future 'case studies' unwind.......
You have some people working at whatever they could find - 3 days a week doing basic work for whatever they can get. Lots of part-time cash jobs. Employers can't afford the costs associated with formally hiring people. Some of the businesses they are working for are barely getting by themselves. A few businesses - HVAC, sprinkler installation and other services - have laid off long time employees or cut them back to part-time simply to keep them working.
But a few people - a very few - have managed to turn this mess to their advantage. They never viewed Wall Street or their previous careers as anything but a limited length endeavor. They socked money away - got houses paid down, money put away for their kids' college and can now afford to work at a non-profit - or go into teaching or.......
One of my son's college roommates parents seem to have done quite well - cashed out when times were good and seem to be set, except for one thing. Health care. One is teaching - more for the good health care benefits than out of altruism. COBRA was limited and this ws the best way to make it to 65 and still be covered without going broke payiing premiums.
In a real change you are now seeing a LOT more moms and dads home with their children.... though not voluntarily
There are serious signs of financial issues elsewhere. Some of those that clearly thought the party would nbever end have really left their kids in bad shape. Some of those nice six figure incomes didn't save a dime for their kid's college and Plan A (remortgage the house) is a no go while Plan B (student loans) is laughable. The 'privatization' of student loans was bad enough in screwing kids with double digit interest rates and unmanageable debt but good luck even trying to find a bank willing to write a stuent loan now. I picked up a brochure in my local branch and the staffer I usually deal with simply laughed.... "those aren't available....' More than a few kids who planned on private universities are in state schools - and a few are holding off for a year. But Sallie Mae is still writing loans - just got a letter that seemed insulted we hadn't applied (for a loan at 11.67% APR). We've been saving since BEFORE we had kids. Having both worked through college we wanted things a bit easier for our kids and are lucky enough to be able to pay. The really sad thing was seeing kids that didn't NEED any financialhelp applying for all these local scholarships last year... and as a longer tenured resident noted - too many went to those whose parents had 'ties' instead of to those who were really deserving and needy.
But then recent grads - even going back to 2007 - are hard pressed to find anything. One 2007 grad is working for the family business, another is scrambling to find ANY pick up work - and is getting stiffed on payment by a few customers. Lots of grads living home. Health care is a real issue - not in school, they aren't covered by their parents' policies and most are going without.
More than a few going to college locally are no longer living in dorms but at home. A few more expect that change after a year (aid doesn't increase with costs).
You're seeing other clear signs of distress. People are not showing up at the local charity events - I'm talking about the ones that do real good. I'm referring to those for sick kids and such - opposed to the "Artsy" private club charity events - though word is that those are hurting too. More than a few local groups have a bunch of people who've put their memberships on hiatus. I've heard (from others... not in our budget, besides we don't play golf or tennis) that the local Country Club is hurting with a bunch of memebers unable to afford dues and spending minimums.
There's a lot less construction going on - which is pretty common in a place with houses that age in range back to the late 1800's. A house has a 75 year 'life' - after which you can cont on replacing the electric the plumbing (often for the second time) and the roof will need a total tearoff since you're up to yout 3rd or 4th redo. Even a painting will often need a total stripping (paint often fails - especially when a few layers of latex are put over old oil base paints). But if you DO have funds - or still have access to a home equity credit line, it's a good time to do a kitchen or bath. Lots of contractors looking for work. Still, the projects underway do seem to be 'minimalist' - not the full-out efforts you saw in the past.
But then there are a few blatant exceptions to all this. A few masters of the universe seem to be thriving - though personally, I'd be inclined to cut down on signs of over the top spending..... One house - on a street to street lot, built in pool, large cariage house, had been COMPLETELY redone 5 years back. Old kitchen wing completely ripped off an drebuilt - the whole house done over. The former owner is now down in Palm Beach - in more temperate climes closer to big buck clients I suppose. But the new owners literally ripped off ALL the work just done and are in the midst of a massive expansion with a drive through addition and all new garage, I expect that $500,000 worth of recent work was just put in dumpsters. Another big place - built as a wedding present for a new bride in the pre-crash 1920's was completely redone after being in the same family since the late 1940's - and having had no real work done on it since it was built. The owners ended up doing far more than they ever planned - or planned to spend but then too many of those working in suits are oblivious to what's involved in renovating an old place. But unlike some other cases, these people seem to be able to afford the overruns. In pointed contrast there are rampant rumors about a place that burned to the ground..... conveniently. Everyone was out to dinner at the time - ane even the family pets were 'out'..........
We haven't reached the point I saw in the 70's when the road to City Island was lined with burning BMW's, Volvos and Mercedes on weekend eves, but then there are cameras up on the poles there now...... lol. Still, someone who knows I do a lot of work on my cars asked me how to 'get rid' of a car..... I suggested donating it to one of those charities that take cars.
There are ALWAY a lot of people here living check to check - and I expect many of them managed to do so very successfully for some time..... Some played the odds and got away with it. One guy bought a wreck of a place - the engineering report said 'bulldoze it' and managed to sell it for $800,000 more than he had in it at peak of market. The people that bought were clueless and fell for the stage set decorating and all the fireplaces (half of which lacked flues - the old chimney covered over at the roofline). Even the minimally educated would have noticed the washboard floorboards (from all the pipes bursting a few years earlier) and could have recognized the pieced in new shingles contrasting with the old ones that had gone without paint for 30 years...... But too many Manhattanites are used to calling the Super for anything.... no wonder the steam boiler blew..... (you NEED to periodically add water to the old steam heat systems - they had NO idea... look, I didn;t either when I bought mine but I saw down and had the burner guy explain the system to me when he was servicing it).
I'm running into a lot more neighbors at Costco lately - though I always ran into some of the older ones who were always prudent about how they spent their money.
Things are FAR worse elsewhere in the country - I fully admit that. Those working at the local food pantry in the adjoining Town are reporting things far more desperate but that's outside the scope of these musings..... the sad thing is that State and County are cutting back THEIR support programs at a time when they are most needed. Friends in Vegas are regretting their move there now but again, outside the scope of this diary.
Having grown up in this general area (admittedly in a far lower rent neighborhood) I can't recall so many people being in serious straits. They are good at hiding it but there's some serious pain out there.
Late night reflections..... I feel like I'm watching the end of the Roman Empire - updated. I doubt that the ruling class even thought about the Goths starving at the edges of Empire or realized that their military was no longer the power it once was (or filled with a cross section of Roman citizens) - or that their politicians were busy distracting the masses with bread and circuses so they wouldn't rise up against the existing system.....
I'm reminded of advice from a person working for one of the large multinational banks (very familiar with Credit Default Swaps and all that's happening). "Buy gold" he said. "And bury it". I suppose if your family came from Europe that makes sense...... but as gold hits over 1053 in the Asian markets..... (so much for a 'pullback')......... who the hell can AFFORD gold?!?! lol......
I suppose cigarettes won't work as a medium of exchange like they did in the late 40's in Europe... but now even a carton of cigarettes is damn expensive....... I wonder if it's too late to find a place in Idaho with all the other apocalyptic survivalists?........lol.... nah.. couldn't sell this place now anyway.